PSE rules out bidding war with Landbank

The Philippine Stock Exchange is awash with P2.9 billion in cash from an equity deal mostly meant to fund the acquisition of Philippine Dealing Systems Holdings Corp. (PDS Group) but it is not likely to engage in a bidding war against state-owned Land Bank of the Philippines.

Ahead of a due-diligence audit on PDS, Landbank has announced an offer of P360 a share of PDS, the holding firm for fixed-income trading platform Philippine Dealing and Exchange Corp., Philippine Depositary and Trust Corp. and Philippine Securities Settlement Corp. The government bank’s offer is higher than the PSE’s offer of P320 a share.

“I don’t think we should be engaging government in a bidding war,” PSE president Ramon Monzon said in a press briefing after the listing of new shares issued by the PSE on Thursday. He noted, however, that this was only his personal opinion.

His view was shared by PSE chair Jose Pardo, who said the exchange was not considering to raise its offer.

“We really have nothing but the interest of strengthening the capital market and I think the DOF (Department of Finance) and SEC (Securities and Exchange Commission) have the same thing in mind: Growing the economy on a sustainable basis,” Pardo said.

“It’s just that there are pockets of differences sometimes,” he added.

The PSE has so far secured commitment from various shareholders to buy 72 percent of PDS but all these agreements – which had been extended three times in the past – would lapse on March 31. The exchange has not asked for another extension of the purchase agreement.

The local bourse has two pending issues with the Securities and Exchange Commission. The first involves ongoing initiatives to comply with the 20 percent limit on brokers’ ownership of the PSE and the second one involves the exemptive relief needed by the PSE to be able to own a controlling stake in PDS.

The existing securities law prevents any single industry from owning more than 20 percent of an operating exchange while no single institution can own more than 5 percent, unless given exemptive relief.

The stock rights offering concluded by the PSE has diluted brokers’ ownership, but the SEC has said the PSE was still not compliant with the ownership cap.

On the PDS acquisition, the PSE has written to the SEC reiterating request for the exemptive relief.

“It’s beyond our control for it to proceed. We need approval from regulators,” Monzon said. But if the PSE won’t get the approval, he said it would be “business as usual” for PSE.

Based on its prospectus, 55 percent of proceeds from the P2.9-billion stock rights offer will be used to repay debt to be incurred from the acquisition of PDS.

But in the event that the acquisition of PDS does not push through, the prospectus said the PSE would utilize part of the proceeds to “explore other opportunities to expand its business and operations.”

“These include, but are not limited to, partnerships with relevant institutions to develop products and services, and funding of technology and other capital-intensive activities to enhance operational and strategic capabilities,” the prospectus said.

“The company is also looking at initially investing the proceeds in income-generating assets such as government securities, money market funds, and time deposit facilities, and will deploy said proceeds in accordance with strategic initiatives that the company may pursue in the future,” it added.