The Razon group’s acquisition of a majority interest in the Ayala group’s Manila Water Co. Inc. still needs to clear another major regulatory hurdle even as the Philippine Competition Commission (PCC) gave green light for the transaction.
Both Manila Water and its parent firm, Ayala Corp. yesterday clarified that the prospective partners still had to secure approval from the Securities and Exchange Commission (SEC) for the water firm to raise its authorized capital stock to P4.4 billion from P3.5 billion.
Such an increase is intended to be done through the addition of 900 million common shares in Manila Water.
A renegotiation of Manila Water’s concession agreement with the Metropolitan Waterworks and Sewerage System (MWSS)—particularly on its having been extended by 15 years to 2037—kicked off earlier this year after outbursts from President Duterte, who earlier alluded to some business leaders as among “rich people in the Philippines who are crazy.”
In January, the Chief Executive repeatedly lashed out at the Zobels for “robbing the government” of billions of pesos by way of an “onerous” concession agreement with the MWSS.
Manila Water announced in February a subscription agreement with the Razon group, through which the latter would step in as a strategic investor acquiring a 25-percent stake in the company for P10.7 billion.
Also in February, Manila Water assigned to the Razon group’s Trident Water Holdings Co. Inc. proxy rights, such that the latter would have a 51-percent interest in the MWSS concessionaire. This would leave the Ayala group an effective voting interest in Manila Water of 31.6 percent.
“The shareholders’ agreement will become effective after the closing of the subscription agreement, which will occur after certain conditions are met, including required lenders’ consent and regulatory approvals,” the two companies said in identical disclosures.
According to the PCC, the transaction will not likely lead to substantial lessening of competition in the market of the supply of raw water to the MWSS East Zone concession area.
“This is because Manila Water, as the sole water distributor in the East Zone geographic market, has a captive customer base and no downstream competitors” based on the concession agreement, the PCC said in a statement.
Also, Manila Water said its subsidiary Manila Water Total Solutions Corp. will shut down on Oct. 31 its bottled drinking water business—under Healthy Family brand—amid recurring losses and failure to financially sustain its operations due to saturation of market and pandemic fallout.
Launched in 2015, Healthy Family has been struggling due to “the ever-increasing competition in the bottled water industry and the recent economic challenges have proved too difficult to cope and keep the business afloat.”