Ayala Corp further cuts stake in Manila Water, sells shares worth P5.7B
MANILA -The Zobel family conglomerate, Ayala Corp., will further cut its minority stake in Manila Water Co. Inc. through the sale of shares worth P5.7 billion, raising the possibility of an eventual full exit from the water venture to focus on core businesses.
Manila Water is buying back common and preferred shares, equivalent to a 10.5-percent stake, from Ayala and its subsidiary Philwater Holdings Co. Inc., the companies said in separate stock exchange filings on Wednesday.
This is the latest move by Ayala to pare its Manila Water ownership after it ceded control of the water concessionaire to gaming and ports tycoon Enrique Razon Jr. two years ago. Once the present transaction is completed, Ayala will retain 23.5 percent voting interest in the water utility apart from a 22.5-percent economic interest.
“Since the water business is no longer a pillar of the Ayala Group, the sale makes sense and could be a prelude to a full exit from [Manila Water] at the right price,” Juan Paolo Colet, managing director at investment bank China Bank Capital Corp., told the Inquirer.
He said proceeds could be used by the conglomerate to “recycle capital toward better growth opportunities”.
Ayala, which is into real estate, banking, telecommunications, power and manufacturing, said the transaction was in step with an earlier-announced plan to raise P50 billion from the sale of non-core businesses.
Past divestments include the sale of the Muntinlupa Cavite Expressway concession to tycoon Manuel Villar Jr.
“The partial divestment is in line with Ayala Corp’s target to raise $1 billion from the sale of non-core assets and to recycle capital to better growth opportunities.
Ayala lost control of Manila Water in 2021, when it sold shares to Razon after president Rodrigo Duterte threatened to jail its executives for supposedly onerous provisions in the company’s decades-old contract.
Share price slips
Based on the stock exchange filing, Ayala will sell 288.99 million shares of Manila Water common shares at P17.16 each, a 4.6 percent discount to the previous day’s closing price.
Moreover, Philwater will sell 436.24 million participating preferred shares at P1.7165 per share.
Shares of Manila Water slipped 0.11 percent to P17.96 each while Ayala closed flat at P615 each.
“The repurchase of the common Shares will be executed as a regular block sale consistent with the rules and guidelines of the Exchange,” Manila Water said in a stock exchange filing.
“The repurchase of the unlisted participating preferred Shares will be covered by a regular deed of sale for sale of shares,” it added.
Manila Water provides water treatment, water distribution, sewerage and sanitation services to more than seven million people in the eastern side of Metro Manila, known as the East Zone.
The area encompasses 24 cities and municipalities spanning a 1,400-square kilometer area including key cities, towns, and municipalities.
Manila Water holds the right to provide water and used water services to the East Zone under a Concession Agreement entered into between MWC and the Metropolitan Waterworks and Sewerage System in 1997.
The concession was extended by another 15 years by MWSS and the Philippine Government in 2009, extending the term from May 2022 to May 2037, the filing showed.