PCPPI to hold tender offer ahead of delisting

Korean firm Lotte Chilsung will pursue a new round of tender offer for shares of local beverage-maker Pepsi Cola Products Philippines Inc. (PCPPI) outside the facilities of the Philippine Stock Exchange (PSE) amid constraints arising from existing tax regulations.

This was after the PSE had stated that it could not lift the trading suspension on PCPPI to facilitate the cross of tender offer shares purchased by Lotte Chilsung, as the existing tax regulations prevent the trading of companies with insufficient public ownership.

PCPPI is undergoing voluntary delisting from the local bourse as its public ownership had declined to 2.1 percent following a tender offer conducted by Lotte Chilsung to consolidate its shares, after which Lotte acquired 1.13 billion additional common shares of PCPPI. Trading on its shares has been suspended at the PSE since June 18 this year as its minimum public float had fallen below the 10-percent requirement for continued listing.

The tender offer is made at P1.95 per share. However, investors will have to shoulder higher taxes and fees, and complete much more paperwork now that the exchange of share will happen outside the PSE.

Based on an amended tender offer report filed by PCPPI at the local stock exchange, the tender offer price does not include selling charges and expenses which will be levied on the tendering shareholder’s account. The charges include the following:

• Capital gains tax of 15 percent of the net capital gain for Philippine residents and domestic corporations, or for resident and nonresident foreign corporations: 5 percent on the first P100,000 of net capital gain; or 10 percent on net capital gain in excess of P100,000;

• Documentary stamp tax (DST) of 0.75 percent of the par value of the transaction

• Upliftment fee and other costs to tender the shares

• Expenses related to filing the capital gains tax return and providing documentation to secure the certificate authorizing registration.

The tendering shareholder must be responsible for the filing of the capital gains tax return, DST return, payment of the applicable capital gains tax and documentary stamp tax within the period provided by law and securing the certificate authorizing registration. The tendering shareholder must shoulder all of its own costs and expenses for the sale of the tendered shares.

Unicapital Inc., an independent financial adviser, has issued a fairness opinion on this tender offer for PCPPI shares.