Razon seen as Manila Water ‘white knight’
Tycoon Enrique Razon Jr. is hatching a deal to buy into beleaguered concessionaire Manila Water Co. as part of his plan to grow his infrastructure business.
Inquirer sources said Razon was now in the thick of discussions—and may soon clinch a deal—to acquire a 44-percent stake in MWC, which has lost nearly half of its value since President Duterte started ranting about alleged “onerous” provisions in the existing contract and cast uncertainty on whether a favorable new contract would be drawn up to extend the life of the concession beyond 2022.
The 44-percent stake being considered by Razon is currently valued by the market at around P11 billion.
Conglomerate Ayala Corp., for its part, is seen to subscribe to new shares in MWC after Razon’s buy-in.
Ayala disclosed on Monday that a buy-in deal has been signed, taking in Razon as a strategic investor in MWC with a 25-percent stake while Ayala remained a shareholder with a 38.6 percent stake. The buy-in deal brings P10.7 billion in fresh equity to MWC.
One source said the deal might be structured in this way so that there would not be—at least not immediately—any change in control of the concession as compared to a total buyout.
At the same time, the structure will allow Razon to buy into the business without having to undertake a tender offer to the rest of the shareholders. The trigger for tender offer is the acquisition of at least 35 percent.
It is widely expected that Razon will use Prime Metroline Infrastructure Holdings as his vehicle for this investment.
By selling existing MWC shares and using the proceeds to infuse into MWC, an analyst said the looming structure is not a direct buyout.
After MWC asked for a voluntary suspension of trading on Friday ahead of a material announcement, its board approved a leeway to increase its capital.
MWC’s authorized capital stock will be raised from P3.5 billion to P4.4 billion, which will consist of an additional 900 million common shares. They also voted to increase the carved-out shares from 300 million unissued common shares to 900 million unissued common shares and to allow the issuance of the carved-out shares “for cash, properties, or assets to carry out” the corporate purposes of the company.
The board likewise approved a minimum selling price of P10 a share for the issuance of common shares in the event the company decides to issue common shares.
These amendments will be presented to stockholders for approval at their annual meeting on April 17.
“This move will give flexibility to the company to raise additional capital and funding when needed. Our access to different funding sources will allow us to be deliberate and to take decisive actions as needed,” MWC told the Philippine Stock Exchange.
“The present circumstances require us to be proactive and ready with different alternatives and options,” it added.
Some analysts said Razon, who had learned how to navigate various regulators in multiple jurisdictions as the chief of port operator International Container Terminal Services Inc., may have been looking at an opportunity to get into the water distribution business for sometime. His entry is also seen to give MWC a better chance at negotiating with hostile regulators.
Eventually, Razon is expected to become the controlling stockholder while Ayala Corp. will be diluted to a significant minority.
“With this buy-in by Razon, it paves the way for a settlement of the contract dispute with MWSS (Metropolitan Waterworks and Sewerage System),” another market source said.
Last year, the Metropolitan Waterworks and Sewerage System approved Razon’s Wawa dam bulk project, which will make available at least 80 million liters a day (MLD) to MWC, the East Zone concessionaire, starting 2021 and more than 500 MLD by 2025.
The project is a partnership with businessman Oscar Violago’s San Lorenzo Ruiz Builders Group, culminating more than 20 years of development work by these parties. INQ
