Pangilinan to buy half of Lopezes' Meralco stake

The Lopezes have decided to stick it out with the group of businessman Manuel V. Pangilinan, entering into a deal in which the latter’s infrastructure-based holding firm could end up owning an additional 6.7 percent of Manila Electric Co. (Meralco), the country’s largest power distributor. The board of Lopez-led First Philippine Holdings Corp. last night rejected a surprise offer by the son of mall and banking magnate Henry Sy to buy the Lopez family’s remaining 13.4 percent stake in Meralco in its longest-ever board meeting that started 12 noon and ended at past eight in the evening with a five-hour recess in between. While Mr. Pangilinan’s Metro Pacific Holdings Corp. matched Henry Sy Jr.’s offer of P300 per Meralco share, First Philippine Holdings, a power generation firm, said it was willing to sell only half of its stake as it wanted to maintain a "strategic" investment in the power retailer. The 6.7 percent stake would cost Metro Pacific P22.4 billion, a substantial premium considering Meralco shares closed at P221 apiece on Thursday. First Holdings agreed to first get half of that amount, P11.2 billion, as a short-term loan from Metro Pacific, at 5 percent interest and secured by shares in Meralco and First Philippine Holdings unit First Gen Corp. The loan matures March 31, 2010. This will help cover the Lopez group’s P12-billion maturing debt, said Elpidio L. Ibañez, First Holdings president. Separately, Metro Pacific has a call option on the 6.7 percent stake that must be exercised before March 31, Mr. Ibañez said. If it is exercised, Metro Pacific must pay P22.4 billion, and this is on top of the P11.2-billion loan which will remain First Holdings’ debt, he explained. The Pangilinan group was given preference over Mr. Sy’s Triratna Holdings Corp. by virtue of a right of first refusal. Philippine Long Distance Telephone Co. (PLDT), partly owned by Metro Pacific parent First Pacific Co., Ltd. of Hong Kong, bought 20 percent of Meralco from the Lopezes last March. Metro Pacific recently bought a 14.7 percent stake bought by two related firms from the open market in February. If Metro Pacific gets the 6.7 percent stake, it would end up owning 41.4 percent of Meralco, securing the firm management control and fending off rival San Miguel Corp., which got a 27 percent stake from the government last year. San Miguel Corp. President Ramon S. Ang is in fact a major shareholder in Triratna Holdings, along with Joselito D. Campos, Jr. of Del Monte Pacific Ltd. The two were Mr. Sy’s partners in a failed bid to buy the state’s power transmission assets last year. The Lopezes, who have controlled Meralco since its American owners sold out in 1960s, could end up with only one board seat in Meralco, giving up one to the PLDT-Metro Pacific bloc. If Metro Pacific does not exercise the call option, the 6.7 percent stake can be offered to other interested buyers, Mr. Ibañez said. In effect, the Pangilinan group received four months to secure more funds, avoiding a tender offer to minority shareholders required in corporate takeovers. Family patriarch Oscar M. Lopez said in a statement: "We are very happy with the agreement reached with [Mr. Pangilinan]. It reflects the valuation that shows the strong growth prospect of Meralco." Proceeds will be used to pursue First Holding’s bid to become a renewable energy company, he added. The group has maturing debt of $20 million in connection with a solar energy venture, executives said. Mr. Ibañez said the First Holdings’ board decision was "unanimous," although the Meralco chairman, Manolo M. Lopez, was abroad. Aside from Oscar M. Lopez, senior family members present in the board meeting were Federico R. Lopez, Augusto Almeda-Lopez, and Eugenio L. Lopez III who heads ABS-CBN Broadcasting Corp. Mr. Pangilinan had come to the rescue of the debt-laden Lopez group in previous instances. Metro Pacific bought water utility Maynilad Water Services, Inc. in 2007 with DMCI Holdings, Inc. when the Lopezes wanted out due to mounting liabilities and a failure to get a tariff hike. Last year, Metro Pacific bought the Lopezes’ stake in the operator of the North Luzon Expressway for P12.2 billion. Mediaquest Holdings, Inc., a unit of the Beneficial Trust Fund of PLDT, has a minor stake in BusinessWorld. - BusinessWorld