Failed takeover bid for GMA Network

The courtship of GMA Network Inc. by a conglomerate headed by businessman Manuel Pangilinan has ended, at least for the time being.

After months of negotiations, PLDT, the corporate vehicle used by Pangilinan to acquire control over GMA, announced recently that the two companies were unable to agree on the terms of the buyout. This is the second time that acquisitions talks between them fizzled out.

Unknown to many, sometime in the mid-1990s, PLDT, then controlled by the family of businessman Antonio Cojuangco, offered to purchase the holdings of the three major stockholders of GMA. The deal did not push through because the gap between the bid and offer prices was very wide.

Looking at Pangilinan’s track record on past transactions of similar nature, it is fair to say that this is not the end of the story between him and GMA. Sometime in the future, when GMA’s controlling stockholders decide to go their separate ways and the offer price is irresistible, expect Pangilinan to make a bid for GMA once more.

Should that day come, however, there is no assurance that Pangilinan would be alone in his pursuit. At the rate other business tycoons in the country are, thanks to the improving business climate, spreading their wings, the bidding for GMA may involve other participants.

Employees

Although GMA’s staff won’t publicly admit it, they must have heaved a big sigh of relief over the collapse of the acquisition talks. They can now sleep soundly, confident that their jobs are secure at least for now.

Had the buyout pushed through, they face the prospects of job cuts or reduction in benefits.

In spite of assurances about job security (which is the standard line during takeover negotiations to minimize internal resistance), most mergers and acquisitions result in the abolition or downsizing of existing positions, with the employees of the acquired company often suffering the brunt of the exercise.

To Pangilinan’s credit, the buzz in the companies that his group has acquired is, jobs are “softly” cut.

It starts with the offer of a juicy separation pay scheme to encourage employees to resign or apply for early retirement. Additional benefits, e.g., five years hospitalization benefits or priority in employment of the employees’ children, are sometimes thrown in to sweeten the pot.

If, in spite of these carrots, the desired reduction number is not reached, the unproductive positions are abolished or declared redundant to justify the dismissal of the employees concerned, subject to the payment of the separations benefits provided for in the collective bargaining agreement or the Labor Code.

Disappointment

The breakdown of the takeover talks is, however, bad news for people who bought GMA stocks when word got around that Pangilinan was interested in acquiring the majority control of the broadcast network.

It is common practice by savvy investors, including brokers and dealers, to quietly buy shares of stocks of companies that are reputed to be potential takeover targets by deep-pocketed business groups.

If the acquisition pushes through and, as a result of the change in the majority ownership, the new owners are obliged by law to make a tender offer for the rest of the stocks held by minority stockholders, the “early bird” investors can expect to earn a windfall from the sale of their stocks.

Too bad, the guys who took a gamble on GMA stocks in anticipation of favorable results in the talks with Pangilinan lost. They’re stuck with those stocks and may have to wait for their prices to go up to an amount that would allow them some profit from their sale after deducting the usual broker’s fees for the transaction.

From the looks of it, the waiting may take quite some time because the share price of GMA fell by almost 9 percent the day after the scuttling of the acquisition talks was disclosed.

If it’s any consolation, had things turned out differently, these investors would be popping up their champagne bottles now to celebrate their gains.

Underwriters

Also probably gnashing their teeth in disappointment over the failed buyout are the underwriting companies and banks that could have provided the funds to pay the asking price of GMA’s major stockholders.

In a transaction of this magnitude, estimated to cost between P50 billion to P60 billion, it is doubtful if Pangilinan would have initiated discussions with GMA without the comforting assurance by a syndicate of underwriters, investment houses and banks to lend him the funds he may need for the takeover.

Megabucks transactions of this nature attract the big players in the investment and banking communities, both here and abroad, like flies to honey. More so now when the US and European financial markets are suffering from contractions.

Had GMA and Pangilinan been able to come to terms, these financiers would have earned millions of pesos in underwriting, syndication, management and a myriad of other fees that usually accompany multibillion peso deals.

The successful takeover would have also translated into tons of professional fees to the lawyers and accountants who will crunch the numbers and draft the contracts that will document the parties’ duties and responsibilities in the planned ownership change in GMA.

As gamblers are wont to say, you win some, you lose some. In GMA’s case, Pangilinan’s vaunted golden touch in deal-making seems to have lost its magic. Better luck next time, if there would be another one.

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