Sy, Coyiuto cancel share-swap deal for Synergy Grid

MANILA, Philippines – Taipan Henry Sy Jr. and luxury cars dealer Robert Coyiuto Jr. have decided to cancel a share-swap deal that would effectively transform their publicly listed Synergy Grid and Development Philippines Inc. as the holding company of the National Grid Corp. of the Philippines (NGCP), which is majority owned by their two separate companies.

The cancelled transaction also puts to rest speculations that NGCP would do a backdoor listing via Synergy Grid.

NGCP operates, maintains and develops the country’s power grid. It holds the 25-year concession contract to operate the country’s power transmission network.

Filipino-owned entities One Taipan Holding Corp.’s Monte Oro Grid Resources led by Sy and Pacific21’s Calaca High Power Corp. led by Coyiuto control the 60 percent stake in NGCP. The remaining 40 percent is held by State Grid Corp. of China (SGCC) as its technical partner.

In a letter submitted to the board of directors of Synergy Grid, the two businessmen said they no longer want to pursue the share-swap deal because they were unable to obtain a tax-free ruling for the transaction.

Sy and Coyiuto said the assignments should have been tax free under Section 40 of the Philippine National Internal Revenue Code (NIRC).

“Since a ruling confirming both assignments as ‘tax free’ under Section 40(C)(2) of the NIRC has not been obtained to date and as the consummation of the said assignments have been pending for five years already, Sy and Coyiuto no longer wish to further wait on the confirmation,” Synergy Grid said.

According to Section 40 of the NIRC, tax free-exchanges are allowed for two instances: transfer to a controlled corporation; and, merger or consolidation.

“In the first instance, no gain or loss shall be recognized if property is transferred to a corporation by a person in exchange for stock or unit of participation in such corporation of which as a result of such exchange said person, alone or together with others, not exceeding four persons, gains control of said corporation,” the NIRC said.

The board likewise approved the cancellation of the increase in authorized capital stock, which was based on the share swap transaction approved by the Securities and Exchange Commission on March 28, 2011.