NTT’s non-exercise of its right of first refusal over any shares in the Philippine Long Distance Telephone Co. (PLDT) which First Pacific will try to dispose is necessary in order for the latter to execute a memorandum of agreement entered into with the Gokongwei group last June 4 that basically calls for the transfer of around 16.3 percent of First Pacific’s 24.4-percent stake in PLDT to the Gokongweis for a price of $616.6 million.
At the same time, Pangilinan and Cojuangco, president and chairman of PLDT, respectively, must be able to convince NTT to exercise this right, contained in a shareholders’ agreement with First Pacific, and allow the local management group to use this in its bid to buy out First Pacific’s interest in the telco.
First Pacific sources told The STAR that no less than Anthony Salim, whose family controls the Hong Kong-based conglomerate, will meet with NTT’s number two man on Friday in Japan. The same sources said that the meeting with Salim, who offered to sell First Pacific’s stake in PLDT and Bonifacio Land Corp. to Gokongwei group patriarch John Gokongwei Jr., followed an earlier meeting between First Pacific and NTT’s advisors.
The same sources said that First Pacific chief operating officer Michael Healy requested to meet with the NTT top brass to convince the Japanese telco, which owns 15 percent of PLDT, not to exercise its right of first refusal, but the NTT officials would only meet with Salim.
But yesterday, the camp opposing the sale of First Pacific’s stake in PLDT to the Gokongweis, led by Pangilinan and Cojuangco, left for Japan from Manila at around 2:30 p.m. for a meeting the following day (June 20) with NTT officials. Sources revealed that the meeting will revolve around a management buyout proposal being engineered by the two top PLDT officials which can only be exercised if they have NTT’s blessings.
Both camps have expressed confidence that they can win NTT over. Top NTT officials earlier said in a news conference in Japan that they have not arrived at a decision yet as to the exercise of their right of first refusal.
First Pacific last June 4 entered into a memorandum of agreement with John Gokongwei Jr. that calls for the creation of a joint venture arrangement that will assume First Pacific’s interest in PLDT as well as a 50.4-percent stake in BLC. The Gokongwei group will have a two-thirds stake in the joint venture and First Pacific, one-third.
But one of the conditionalities contained in the MOA necessary for the completion of the transaction is for NTT not to exercise its right for first refusal. Another conditionality is the conduct of a due diligence review of the two Philippine companies.
The other day, Gokongwei told The STAR that a due diligence investigation is necessary, especially for a transaction of this magnitude.
The PLDT board has refused to cooperate and even issued a resolution preventing the Gokongwei group from conducting a due diligence since they own Digitel, a competing telecommunications company.
Gokongwei said First Pacific will have to facilitate the conduct of a due diligence. As far as the reported management buyout being hatched by Pangilinan and Cojuangco, he stressed that he is just a willing buyer. "If they want it, they can have it. But they will have to convince NTT," he emphasized.
The chairman emeritus of JG Summit Holdings said that they are supposed to conduct a due diligence within a 30-day period which commences from a pre-agreed date. The date has not yet been fixed and sources say that First Pacific is seeking an extension.
Both Healy and First Pacific group counsel Ron Brown said earlier that the Gokongweis might not need to do due diligence on PLDT since the company is already ‘transparent’ and has made extensive financial disclosures.
But knowledgeable sources said that while these public disclosures may address the financial due diligence aspect, the Gokongwei’s will be blindfolded on the legal, contractual, and technical due diligence aspects which are more important.
In a related development, Gokongwei told The STAR that PLDT and his own telco, Digitel, will definitely be merged once the sale transaction is completed.
"Once the actual purchase of PLDT by the Gokongwei group takes place, it will set into motion the merger agreement," he said.
Gokongwei emphasized that Digitel will definitely be folded into PLDT, but this will be subject to the approval of minority stockholders of both companies and subject to valuation by two investment bankers. "This can be Lehman, Morgan, or ING. It’s not easy. We are not even going to be the majority in PLDT," he said.
He explained that as far as the details about the merger of PLDT and Digitel are concerned, they cannot still talk about it, although he quickly emphasized that there is no doubt as to which company will receive priority once the merger takes place.
"Digitel is small. We invested $50 million and it is now $100 million. In PLDT, we are putting in $650 million. If you were in my place, which will you favor? PLDT of course," Gokongwei said.
He added that once the merger takes place, there should be a get together among the technical people of the two companies to rearrange sites. "We do not want to be in the same place," he said.