AND THE WINNER IS...?
The Philippine Star
03/20/09
Manila Electric Co. hasn’t lost its touch in dishing out electrifying surprises and controversies.
In the past week, we’ve seen how control of Meralco has shifted, ending the nearly five-decade foothold of the Lopez family in the country’s largest power distributor. And like a spoiled diva, the Lopezes have raked up quite a storm before bowing out.
Philippine Long Distance Telephone Co., the nation’s most valuable and most profitable, will own a combined 30.3 percent of Meralco through the 10.17 percent stake of its beneficial trust fund or BTF and the agreement of its subsidiary Pilipino Telephone Corp. to buy 20.07 percent from First Philippine Holdings Corp.
San Miguel Corp., the biggest food and beverage company in the country that’s expanding into banking, energy and telecommunications, agreed to buy 27 percent of Meralco from Government Service Insurance System; and Global 5000 Corp., a group linked to SMC inked a deal for another 10 percent.
Reckoning
As the dust settles, the Lopez Group seems to have a remaining 13 percent; and PLDT, presumably allied with the Lopezes, have 30.3 percent. San Miguel appears to have a combined 37 percent.
There is a possibility that PLDT may eventually sell the trust fund stake to Metro Pacific Investments Corp., the local unit of Hong Kong’s First Pacific Co., which is its biggest shareholder.
Indeed, it does look like a tug-of-war of sorts. That’s the most obvious conclusion one can draw especially if you think that San Miguel is venturing into PLDT’s turf with Qatar Telecommunications Inc.
PLDT has ticked off more than a handful of reasons for buying into Meralco, including the use of its poles for its phone wires, utilizing the power lines for broadband services and initiating prepaid electricity services using the cellular phone business platform.
San Miguel is naturally interested in Meralco as a centerpiece of its energy venture that now includes Petron Corp., the country’s biggest oil refiner.
Investors’ reaction
In the meantime, PLDT and San Miguel investors are apparently not reacting positively to the companies’ moves on Meralco. San Miguel’s stocks have been taking a beating since the fourth quarter of 2008 when it disclosed the energy investments.
PLDT’s share price have fallen by more than 15 percent since last week when it announced the trust fund purchase of Meralco, followed by the agreement of Piltel last Friday the 13th.
Since then, the company’s ratings with investors have been downgraded and Moody’s Investors Service quickly changed the review status of PLDT’s credit rating to “direction uncertain” from a “possible upgrade” a week prior to the March 9 disclosure of the trust fund purchase.
Moody’s last month downgraded San Miguel’s rating also because of its venture outside of its “core business” of food and drink production, a supposed comfort zone that investors have long derived profits from.
JPMorgan Chase this week took PLDT out of its so-called Aces list, or its top stock picks for the Southeast Asian region, and downgraded its rating of the Philippine Stock Exchange Index to “neutral” from “outperform” primarily because of the effect of PLDT, having the biggest weight on the local bourse’s index.
PLDT investors seem to be worried that the huge cash requirements of Meralco will dry up the company’s coffers and force it to stifle dividends.
Investment opportunity
PLDT has stressed it will maintain a 70 percent dividend payout ratio, won’t be responsible for the capex requirements of Meralco, stand to generate savings and synergies from the venture, and will work together with shareholders, in particular, SMC. San Miguel’s Ramon Ang, on the other hand, has stressed the same thing: that the two companies will cooperate.
Both PLDT and San Miguel consider Meralco a good investment, being in a natural monopoly with a newly extended and broadened franchise.
As for the Lopez family, notwithstanding the emotional attachment involved, a deal with PLDT is the best way to cash out of a very politically-sensitive investment and clear its plate of heavy debt loads.
Behind the scenes
People are too busy thinking of how PLDT and San Miguel can outsmart the other but they forget to look into personalities behind the scenes. Roberto “Bobby” Ongpin, the trade chief of the Marcos regime who’s allied to both PLDT and San Miguel, has been busy.
PLDT owns about a fourth of Ongpin’s PhilWeb, and had bought its 3G license – re-branded as Red Mobile – and perhaps some other joint undertakings.
Ongpin gave San Miguel an option to buy SEA Refinery Philippines, which will give the food-and-drinks conglomerate an indirect control of Petron. He is also named as incorporator of Global 5000 and has a stake in Q-Tech Alliance Holdings that bought Kirin Holdings Co.’s 20-percent stake in San Miguel last month.
The Ongpin factor has so far been underplayed (and sometimes, overlooked) but it could very well be the stabilizing agent in this supposed competition between PLDT and San Miguel. In business, there are indeed no strange bedfellows.
Will consumers benefit?
Manny Pangilinan and Ramon Ang are both involved with companies that deal with millions of consumers – texters, electricity users, oil products consumers, beer and beverage drinkers, hot dog eaters, etc. In all of these stocks and equity maneuverings, the question foremost in the mind of the consuming public is – will we benefit from these transactions or is it just more of the same with new personalities controlling the basic needs of our daily living?
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Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, SalcedoVillage, 1227 MakatiCity. Or e-mail me at reydgamboa@yahoo.com. For a compilation of previous articles, visit www.BizlinksPhilippines.net.
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