Tender offer price for FPH deemed fair, reasonable

The price of P3.85 per share tender offered by First Philippine Holdings (FPH) to buy out publicly held shares of parent firm Lopez Holdings Corp. (LPZ)—which intends to delist from the local stock exchange—stood within the fair valuation estimate of an independent financial adviser.

Based on a Dec. 12 fairness opinion issued by KPMG/R.G. Manabat & Co., the fair value of the listed common shares of LPZ ranges between P2.34 and P3.92 each as of the cutoff date at end-September. KPMG thus deemed the tender offer price “fair and reasonable” from a financial point of view as of the cutoff date of Sept. 30.

On Monday, LPZ officially filed a petition for voluntary delisting of its 4.63 billion common shares from the main board of the Philippine Stock Exchange, conditioned on its public ownership falling below the 10 percent required by the local bourse to remain on its roster.

On Dec. 1, LPZ acknowledged the conduct by FPH of a tender offer to acquire a minimum of 20 percent and a maximum of 45.56 percent of the total issued and outstanding common shares of LPZ from all the shareholders, excluding the shares owned by its ultimate parent entity, Lopez Inc.

The board of directors of LPZ then approved the engagement of KPMG as independent financial adviser to provide a fairness opinion on the tender offer price.

In its report, KPMG used three generally accepted valuation approaches. The first is the income approach involving the dividend discount model (DDM) and the discounted cash flow (DCF) methods.

In the DDM method, the equity value of LPZ was based on the projected dividend payment of the company, while in DCF, cash flows from dividends and cash contributions to be declared by LPZ subsidiaries and affiliates as well as general and administrative cash expenses were projected for 2021 to 2025 and discounted back to the cutoff date using an acceptable discount rate.

The second approach used by KPMG was the market approach, specifically the volume weighed average price (VWAP) method using 30-day, 60-day, 90-day and one-year VWAP.

The third methodology was the cost approach or net asset value, where the underlying assets were valued using the income or market approaches. KPMG determined the fair market value of Lopez investment in the Philippine depositary receipts and investment in FPH—the two investment accounts considered as the company’s value drivers. KPMG also applied a holding company discount to take into account the historical discount applied by the market on shares of LPZ.

On Tuesday, shares of LPZ fell by 0.27 percent to close at P3.72 per share, giving it a market capitalization of P16.94 billion. The company has a free float of 43.32 percent at present.The Lopez family wants to bring LPZ back to private hands to consolidate ownership and simplify corporate structure.—Doris Dumlao-Abadilla INQ