JG Summit bolsters war chest with P12.4-B sale of Meralco shares

The billionaire Gokongwei family’s JG Summit Holdings Inc. said it sold a P12.4-billion block of shares in Manila Electric Co. (Meralco), the country’s biggest electricity distributor, shoring up the conglomerate’s war chest amid deepening global recession concerns.

The offer was a private placement deal involving 36 million Meralco shares at P344 each, JG Summit said in a stock exchange filing on Friday.

The buyers were not mentioned but Manuel V. Pangilinan-led infrastructure giant Metro Pacific Investments Corp., Meralco’s biggest shareholder, later said it acquired an additional 22.54 million Meralco shares at the same price for P7.75 billion, upping its stake to 47.5 percent from 45.5 percent.

JG Summit effectively cut its ownership to over 26 percent from 29.56 percent.

“[We] just want to make sure our balance sheet is strong as the economy faces some headwinds,” JG Summit head of strategic investment Bach Johann “BJ” Sebastian told the Inquirer in a text message on Friday.

Shares of Meralco fell 7.1 percent to P340 apiece on Friday while JG Summit lost 6.4 percent to P51.50 per share. Metro Pacific also sank 0.54 percent to P3.69 per share as the broader stock exchange index retreated 1 percent.

Meralco has been a profitable investment and a major earnings contributor for the Gokongwei holding firm, which has core businesses in food and beverage, airlines, property development and petrochemicals, among others.

In the first quarter of 2022, JG Summit reported a net loss of P2.8 billion as results were weighed down by Cebu Pacific and JG Summit Olefins.

JG Summit made its initial Meralco investment in 2013, when it acquired a 27.1-percent stake from conglomerate San Miguel Corp. and its affiliates for P72 billion, which was about P236 per share.

Four years later, JG Summit increased its stake in Meralco to over 29.5 percent.

The electricity distribution giant has been operating for over 117 years, providing power to seven million customers across 36 cities, including those in the Metro Manila.

Apart from selling the shares at a profit, JG Summit has recorded about P45 billion in earnings from Meralco since 2014, based on Inquirer calculations. Following the sale, JG Summit would be left with 297.2 million Meralco shares worth about P101 billion, using current market prices.

“They may be positioning for opportunities that might occur during this challenging time especially if this is not a core business,” Jonathan Ravelas, financial strategy consultant at e-Methods for Business Management Corp., told the Inquirer.

Sebastian said the money from the sale would be set side for general corporate purposes. He described the deal as “financial conservatism and balance sheet management, as well as being given the opportunity to sell at a good price.”

Two years before investing in Meralco, JG Summit sold its telecommunications business, Sun Cellular, to PLDT Inc. via a P70-billion share swap deal. JG Summit maintains an 11.27-percent stake in the telco giant, which is also led by Pangilinan.