Landbank offering P1.5B for control of PDS

The Land Bank of the Philippines board is offering P1.5 billion for a majority stake in the Philippine Dealing System Holdings Corp. (PDS Group).

In a text message to reporters on Thursday, Landbank president and chief executive Alex Buenaventura said the board approved on February 27 a proposal to purchase at least 66.67 percent of total PDS common shares at P350 apiece.

The board already approved in principle the move to acquire a controlling interest as early as January, fast-tracking a due diligence on orders from Finance Secretary Carlos Dominguez III.

PDS is the holding firm for fixed-income trading platform Philippine Dealing and Exchange Corp., Philippine Depositary and Trust Corp. and Philippine Securities Settlement Corp.

Landbank already notified the Securities and Exchange Commission it would seek exemptive relief from the mandated limits on exchange ownership.

Buenaventura’s plan to acquire two-thirds of PDS could derail the latter’s planned merger with the Philippine Stock Exchange (PSE).

Dominguez, who also chairs Landbank, had ordered the lender to look into the deal, noting PSE was not being compliant with conditions set for a union with PDS.

In a Jan. 16 letter to Landbank’s board of directors, Buenaventura explained that “at a price of P320 per share, PDS is undervalued and purchasing PDS shares could be a profitable investment for Landbank.”

According to Buenaventura, Landbank would benefit from stable recurring cash flow from the various fees PDS charges to market players as the country’s central securities depository and fixed-income exchange. More than 70 percent of the income of PDS is from the provision of services as a depository, registry and financial intermediary and over 20 percent of revenues come from trading services, another area of opportunity as the local bond market matures.

“PDS has an asset-light business model and consistently registers healthy Ebitda margins above 45 percent and wide net profit margins above 25 percent. PDS reported an ROE of 14.4 percent and 15.1 percent in 2015 and 2016, respectively, which is depressed due to significant excess cash and liquid assets,” Buenaventura said.

Beginning 2014, PDS has been growing 9.1 percent annually, he added.

Buenaventura said the market still had room for growth, noting it was even lagging behind some of its Asean peers.