FPC planned to revoke MVP proxy, but backed out at the last minute

Hong Kong-based First Pacific Co. Ltd. (FPC) was all set to revoke its proxy granted to embattled Philippine Long Distance Telephone Co. (PLDT) president and chief executive officer Manuel V. Pangilinan and vote new nominees during yesterday's PLDT board elections, but backed out at the last minute.

The STAR learned that First Pacific Co. Ltd. (FPC) corporate secretary Ronald Brown, who is said to be the designee of FPC to vote its 24.4 percent stake in the company equivalent to six seats in the PLDT board, was expected to arrive in Manila yesterday morning and was already booked at The Peninsula Manila .

"We were expecting him to arrive and vote FPC's shares during yesterday's board election. We were surprised to learn that Manila Peninsula got a call at around 1:30 in the afternoon yesterday that Mr. Brown cancelled his flight to Manila and that his bill will just be settled," a top PLDT official revealed.

Last June 10, Brown wrote a four-page letter to Pangilinan, informing the latter that in order to address any actual or potential conflict of interest that may arise due to Pangilinan's dual position as executive chairman of First Pacific in Hong Kong and as president of PLDT, First Pacific wanted to ensure that PLDT ‘will be in a position to take the appropriate action on any matter brought before the annual stockholders' meeting that may affect the implementation of the proposed transaction with the Gokongwei group.

It will be recalled that on June 4, First Pacific entered into a memorandum of agreement with the Gokongwei group whereby the former's 24.4 percent stakeholding in PLDT will be sold to a joint venture arrangement to be participated in by the Gokongweis and First Pacific on a two-thirds and one-third basis.

The Gokongwei group will be paying $616.6 million for the two-thirds stake in the joint venture, equivalent to a 16.3 percent interest in PLDT. The balance of $308 million (the transaction has been valued at $925 million) will represent First Pacific's equity participation in the joint venture.

The PLDT board and management, led by Pangilinan and chairman Antonio ‘Tonyboy’ O. Cojuangco, however, opposed the First Pacific-Gokongwei deal, saying that the PLDT by-laws prohibits a competitor from being a director. The Gokongwei group owns Digital Telecommunications, Inc. (Digitel), the country's second largest fixed wireline telephone company.

The board also issued a resolution preventing the Gokongwei group from conducting a due diligence review of PLDT's finances and operation. The due diligence is said to be a requisite for the completion of the transaction.

In the same letter to Pangilinan, Brown said that by virtue of a First Pacific board resolution, the company was immediately transferring to him (Brown) being a designee of First Pacific the power to exercise the Hong Kong-based conglomerate's voting rights and in the alternative "the immediate revocation of any or all proxies granted in your (Pangilinan) favor by the Philippine Telecommunications Investment Corp. (PTIC) and Metro Pacific Resources Inc. as well as Larouge BV and Asia Link BV if applicable, to vote their PLDT shares at the forthcoming general membership meeting."

PTIC, which has a 15.4 percent stake in PLDT, is owned 53.9 percent by Metro Pacific Assets Holdings Inc. (MPAHI) and Larouge BV, another First Pacific subsidiary. MPAHI also has a right under proxy to vote approximately 46.1 percent of PTIC's outstanding shares said to be owned by ‘Tonyboy’ Cojuangco.

Metro Pacific Resources Inc., on the one hand, which owns 10.12 percent of PLDT, is 60 percent owned by Metro Pacific Holdings Inc., a Philippine affiliate of First Pacific. Asia Link BV and Larouge BV which own 6.7 percent of PLDT's outstanding common shares, are also affiliates of First Pacific.

Of the PLDT board directors in 2001, those representing Metro Pacific and PTIC's interests in PLDT include Pangilinan, lawyer Ray Espinosa, corporate secretary Ma. Lourdes Rausa-Chan, Ricardo Zarate, and Napoleon Nazareno, and Albert del Rosario. PTIC's remaining interest, is said to be represented by Cojuangco, who personally owns nine percent of PLDT.

And because First Pacific, through Brown, was not able to take away the proxy nominations, the six continue to represent First Pacific's interest in PLDT.

"The interesting question to ask is – First Pacific's proxy holder, Ronald Brown, did not show up and did not vote. So does First Pacific have nominees on the PLDT board that would support its deal with the Gokongweis? That remains to be seen," the PLDT top official said.

There are many speculations as to why Brown did not show up. Immediately after the stockholders' meeting and election of officers, the board met and tried to come up with scenarios as to why he did not push through with his plan to go to Manila.

One said that it would be impossible for him not to earn the ire of the PLDT stockholders and employees, all of who are supporting Pangilinan and Cojuangco in their bid to stop the Gokongwei takeover.

There are those who fear, however, that First Pacific may already have the support of some of the board members, without Pangilinan and Cojuangco knowing it.

The next recourse for First Pacific is to cause the holding of a special stockholders meeting to remove the incumbent board and elect a new one. However, the Corporation Code provides that such meeting can only be held upon two-thirds votes of all stockholders on record.

"The most that First Pacific can get to support the deal is five seats, since Pangilinan is already assured of one under the memorandum of agreement between First Pacific and the Gokongwei group. Citicorp Trade Services Ltd, which owns 18.47 percent of PLDT as nominee of Citibank NA Manila – depositary of the common shares underlying the American depositary shares – will not vote to support the Gokongwei deal especially if substantial opposition exists," a knowledgeable source said.

So at least until the First Pacific-Gokongwei deal complies with all the necessary conditionalities and completes the transaction hopefully, sometime third quarter of this year (unless a legal battle ensues which can drag on for years), the Pangilinan-Cojuangco led management will continue to remain at PLDT at least until the next stockholders meeting in 2003, the source added.