PCC OKs Razon’s acquisition of controlling stake in Manila Water

The Philippine Competition Commission (PCC) said Tuesday it has approved the acquisition of a controlling stake in Manila Water Inc. by Enrique Razon-led Trident Water Holdings Company Inc., the holding firm of Prime Metroline Holdings Inc. (PMHI).

In February, Ayala Corporation granted 51% voting interest in Manila Water to Trident Water through subscription of 820 million common shares of stock from the unissued authorized capital stock of the water distribution utility.  

Moreover, Manila Water’s subsidiary, Philwater Holdings Co., is set to grant proxy in favor of Trident Water over the seller’s preferred shares to allow Trident Water to achieve a 51% voting interest in Manila Water.

In its Commission Decision, the PCC said it found that the transaction “will not likely lead to substantial lessening of competition in the market of the supply of raw water to the East Zone Concession Area.”

“This is because Manila Water, as the sole water distributor in the East Zone geographic market, has a captive customer base and no downstream competitors based on a concession agreement Manila Waterworks and Sewerage System (MWSS),” it said.

The PCC said that waterworks is a form of “natural monopoly” allowed by law through regulation and that East Zone concessionaire Manila Water is subject to the extensive oversight and regulation by the MWSS in operating within 23 areas including Makati, Mandaluyong, Pasig, Pateros, San Juan, Taguig, Marikina, parts of Quezon City, Manila, and portions of Rizal.

“In the merger review by Mergers and Acquisitions Office (MAO), the merged entity will neither have incentive nor ability to engage in customer or input foreclosure in the said market,” the antitrust body said.

“While PCC found that there is absence of horizontal overlaps between the parties and are not direct competitors, the PCC review noted that a vertical relationship exists between the parties’ notifying group within the water sector before this merger transaction,” it said.

The PCC also found that customer or input foreclosure is unlikely given that the arrangement is meant to service the East Zone even beyond the lifetime of Manila Water’s concession.

“Such foreclosure is deemed unlikely by PCC since operations—including the procurement, development, allocation, rate rebasing, and other supply-and-demand dynamics in the water sector—are highly regulated by MWSS,” it said.

Trident Water Holdings Company Inc., is a subsidiary of PMHI, whose range of business interests span hotel and gaming operations, mining, infrastructure, power generation and distribution, and port services.

Manila Water, the acquired entity, is a publicly listed company holding the exclusive right to provide water services, particularly water treatment, water distribution, sewerage and sanitation services, to the eastern zone of Metro Manila via a concession agreement with the Metropolitan Waterworks and Sewerage System (MWSS). — Ted Cordero/BM, GMA News