All eyes on rekindled PSE bid to unify capital markets

Philippine Stock Exchange, Bonifacio Global City. INQUIRER PHOTO/LYN RILLON

The Philippine Stock Exchange (PSE) is expected to unveil a new offer to take over the local bond trading platform after clearing regulatory hurdles, which may soon kick off price negotiations and bring the decadelong plan to unify the country’s capital market infrastructure closer to completion.

Jose Teodoro Limcaoco, president of the Bankers Association of the Philippines (BAP) and Ayala-led Bank of the Philippine Islands, said BAP is expecting “a formal offer” from the PSE this week to buy the group’s 21-percent stake in Philippine Dealing System Holdings Corp. (PDS).

Limcaoco declined to give BAP’s desired price for the sale which, he said, would likely be far from the amount that PSE would offer. But he was nevertheless confident that valuations would not be a “stumbling block” for the multibillion-peso merger.

“We have an internal valuation as I’m sure they (PSE) have also. And I’m sure they’ll be far apart,” Limcaoco told reporters on the sidelines of the 50th anniversary celebration of the Bank Marketing Association of the Philippines last week.

“But I’m sure we can come to an agreement. I’m sure price is not an issue,” he added.

BAP is among the largest shareholders of PDS, which operates Philippine Dealing and Exchange Corp., Philippine Depository and Trust Corp. and Philippine Securities Settlement Corp. The powerful association consists of at least 20 local banks and 24 foreign bank branches.

While BAP members and institutions currently hold 21 percent of PDS shares, the PSE also owns nearly 21 percent. Limcaoco earlier said that BAP first wanted to understand how the merger would be governed before agreeing to any deal.

Last April, PSE president Ramon Monzon said his group was hoping to complete the consolidation of both exchanges this year. The unification has been a decade in the making and is seen to transform the PSE into a “one-stop shop” for multiple asset classes.

The PSE almost completed its acquisition of PDS in 2017 after BAP had agreed to sell its shares in a deal that valued the bond trading platform at P2.2 billion. However, the Securities and Exchange Commission (SEC) blocked the deal, saying that it would breach the 20-percent industry ownership cap under the Securities Regulation Code.

In November last year, the SEC commission en banc reversed this decision and allowed the bourse to apply for exemptive relief from the ownership limit. To avoid regulatory complications this time around, Monzon said they had “reversed” the negotiation process and first got the SEC’s approval prior to finalizing the deal. INQ