‘End of an era’: Ayala exits Manila Water
MANILA, Philippines — After a 27-year investment in a highly regulated utility, the Ayala conglomerate is unloading its remaining economic interest in Manila Water Co. (MWC) to tycoon Enrique Razon Jr.-led Trident Water Company Holdings Inc. for P14.5 billion.
Building up group-wide cash reserves, Ayala Corp. and subsidiary Michigan Holdings Inc. are collectively selling their nearly 578 million common shares for P22.36 each. The price shows a 7-percent discount from MWC’s 30-day volume-weighted average price as of May 16.
The 872.49 million preferred shares held by Philwater Holdings Company Inc., another Ayala subsidiary, are also being sold for a negotiated price of P1.844 per share.
Ayala and Philwater have a combined economic stake of 22.54 percent in MWC. The common shares held by Ayala represent 22.27 percent of the common stocks while Philwater’s preferred shares account for 24.48 percent of total.
Rechanneling resources
Still, Ayala will hold a 12.08-percent economic stake through preferred shares that will be paid on installment until 2029. Once fully paid, it will no longer have any interest in the firm.
At present, Trident Water, a subsidiary of Prime Infrastructure Capital Inc., owns 52.16 percent of MWC, which serves over 7 million residents in the eastern side of Metro Manila.
READ: Razon wants Manila Water to become a global firm like ICTSI
“The divestment marks the end of an era for the conglomerate after having spent decades building an efficient and profitable water utility operation,” China Bank Capital Corp. managing director Juan Paolo Colet said.
“This is a good exit for Ayala as it will enable them to re-channel resources to core businesses and to pursue investments with higher potential upside,” he added.
“The development solidifies Prime Infra’s market leadership in the water sector, driven not only by the performance and potential of Manila Water at home and abroad but also by its synergy with our other majority-controlled bulk water subsidiary WawaJVCo Inc.,” Prime Infra president and CEO Guillaume Lucci said.
Ayala Group unloading assets to raise P50B
The deal is in line with Ayala Group’s plan to unload assets to raise P50 billion, which will extinguish debts and finance future investments.
The privatization of the Metropolitan Waterworks and Sewerage System was completed in 1997, with the government awarding the east zone contract to Ayala-led MWC and the west zone concession to Maynilad Water Services Inc.
READ: Razon gains 51% voting rights in Manila Water
Razon first invested in MWC in 2020, initially buying 24.96 percent and obtaining a controlling stake in 2021. Ayala further cut its stake just last year, selling 10.05 percent.
The Permanent Court of Arbitration in Singapore ordered the Philippine government in 2019 to pay Manila Water P7.4 billion for losses and damages, which former President Rodrigo Duterte did not receive well.
But MWC eventually gave up its claims. In December 2019, the Duterte administration revoked the contracts extending the concession from 2022 to 2037. But Mr. Duterte eventually signed a law granting a 25-year franchise in January 2022, concluding the dispute.
