In an interview with The STAR, JG Summit Holdings president and chief operating officer Lance Gokongwei said their group has not started with the due diligence, mainly because ‘the conditions to do such are not yet existing.’
The PLDT board, chaired by Antonio O. Cojuangco Jr., earlier approved a resolution that would prevent the Gokongwei group from conducting a due diligence review, citing the anti-competitor provision in the company’s by-laws.
The Gokongwei group owns and operates Digital Telecommunications Phils. Inc. (Digitel), the country’s second biggest fixed wire telephone company, operations mainly in its franchise area in Luzon. PLDT, on the other hand, is the largest telecommunications company in the country, with around 1.5 million wirelines subscribers.
Last June 4, First Pacific signed a memorandum of agreement with the Gokongwei group which calls for the creation of a joint venture arrangement that will absorb FPC’s 24.4-percent interest in PLDT and assume a $106-million loan extended to FPC subsidiary Metro Pacific Corp. secured by 50.4 percent of BLC’s outstanding common stocks.
A day after the signing, JG Summit officials said that the amount of P616.6 million that the Gokongwei group will have to shell out over a three-year period for a two-third stake in the joint venture may still change depending on the outcome of a due diligence review.
STAR sources revealed that the MOA provides for a 30-day period from the day of the signing for the Gokongwei group to conduct the financial, technical, operational, and economic review of PLDT and BLC.
Asked to comment on this 30-day period, Gokongwei said he could not comment on the contents of the MOA, which he described as confidential.
Given that PLDT will not cooperate with the due diligence conduct, Gokongwei said First Pacific will have to help out in this respect.
First Pacific executive director and company secretary Ronald Brown said PLDT’s refusal to cooperate is not a problem because there is plenty of information on PLDT from bond circulars and because PLDT president and chief executive officer Manuel V. Pangilinan has turned it into a relatively transparent company.
While Gokongwei agreed with Brown in this respect, he said there is not much information about Bonifacio Land, which is part developer of the ambitious mixed-use development project in Fort Bonifacio, Taguig.
The completion of the transaction between FPC and the Gokongwei group is subject to the fulfillment or waiver of a number of conditions precedent, including the Gokongweis not having notified First Pacific in writing on or before the expiry of a to be agreed due diligence period that the Gokongwei group’s due diligence has revealed a material change.
If the Gokongwei group’s due diligence investigation reveals a material adverse change amounting to $50 million or more in respect of the interests to be contributed to the joint venture arrangements from that shown in the applicable latest publicly available audited financial statements, the MOA provides for a price adjustment in the consideration to be paid by the Gokongwei group.
The Gokongweis and FPC expect the transaction to be completed sometime September this year, although the timetable may be extended due to PLDT’s non-cooperation on the conduct of the due diligence.
Legal experts, however, said that the Gokongweis can always waive their right to a due diligence "although this is highly doubtful because by waiving such, they will have to buy PLDT and BLC blindfolded."