Dito CME to gain control of telco biz in P68.4-B backdoor deal

Davao-based businessman Dennis A. Uy’s Dito CME Holdings Corp. is poised to take a controlling stake in Dito Telecommunity through layers of companies as the group reshuffles its shares in the telco startup backed by China Telecom.

The Philippine Stock Exchange (PSE) on Friday also placed Dito CME under trading suspension until a “full and comprehensive disclosure” is released.

The suspension was triggered after Dito CME said it executed the buyout of affiliate Udenna Communications Media and Entertainment Holdings Corp. (Udenna CME) last Nov. 11 via a P68.4-billion share swap with Uy’s holding company, Udenna Corp.

Under the agreement, Dito CME will issue 11.2 billion new shares. This is still subject to approval by the Securities and Exchange Commission.

Dito CME said on Friday the shares were priced at P6.11 each or a total of P68.4 billion for 100 percent of Udenna CME. This was the low-end of a price range of P6-6.90 per share announced days earlier.

Dito CME is using Udenna CME as its corporate vehicle to gain control of Dito Telecommunity, which is targeting to launch commercial services by March 2021.

Udenna CME controls Dito Holdings Corp., which is being transformed into the main holding company of the Uy groups’ 60-percent stake in Dito Telecommunity.

The 60 percent will come from Udenna (35 percent) and publicly listed affiliate Chelsea Logistics and Infrastructure Holdings Corp. (25 percent) while strategic partner China Telecom owns the remaining 40 percent.

Udenna CME previously held a 58-percent stake in Dito Holdings but on Friday said this would increase to 89 percent after sealing an agreement to acquire another 7.4 billion shares at P1 each last Nov. 11.

With the transfer of 60 percent of Dito Telecommunity to Dito Holdings, Dito CME will gain an indirect 53-percent interest in the telco startup via Udenna CME.

At the same time, Chelsea’s 25-percent stake will be cut to about 7 percent. Chelsea shares fell 3.78 percent to P5.85 each on Friday while Dito CME shares, last traded at P6.30 apiece, remained suspended.

For Chelsea investors, this was a shift in direction after the company said in a Nov. 3 disclosure it would “continue to hold 25 percent of Dito Telecommunity” through Dito Holdings.

Stock market observers said they remained wary of the ongoing reorganization since investors were being issued details on a piecemeal basis.

One stock broker also welcomed the PSE trading suspension of Dito CME, saying more information was needed on the “backdoor listing” of Udenna CME.

“They should submit the financials of Udenna CME so that the public knows what they are acquiring,” the broker said, referring to details such as the valuation report to justify the multibillion peso share swap.