PLDT wins first round as First Pacific blinks

Local telecommunications giant Philippine Long Distance Telephone Co. (PLDT) has won the first round of a legal war it has waged against parent firm First Pacific Co. Ltd. of Hong Kong after the latter agreed to submit a copy of its agreement with the Gokongwei group to the US Securities and Exchange Commission. The agreement covers the proposed sale of First Pacific's interest in PLDT as well as in Bonifacio Land Corp. (BLC).

First Pacific said in its disclosure to the Hong Kong Stock Exchange (HKSE) that it is arranging to submit at the earliest practicable time its June 4 memorandum of agreement with the Gokongwei group which basically provides for the creation of a joint venture arrangement that will buy out First Pacific’s 24.4-percent economic interest in PLDT and 50.4-percent stake in BLC.

Lawyer Perry Pe, personal counsel of Gokongwei group chairman emeritus John Gokongwei Jr., told The STAR yesterday their group was consulted by First Pacific regarding the submission of the MOA ‘which was supposed to be a confidential document’ and they agreed.

Asked why a copy of the MOA was not submitted in the first place, Pe said there was no need at that time.

For its part, PLDT, in a statement, said it welcomes First Pacific’s decision to disclose the MOA. "This decision is a positive development for the rules of full and fair disclosure and good corporate governance and for all PLDT shareholders who have a right to information concerning the possible transfer of a significant block of PLDT’s shares and involving a potential shift in corporate control," it said.

Portions of the MOA, including the composition of the joint venture company (two-thirds Gokongwei group and one-third First Pacific), the terms of payment by the Gokongwei group of $616.6 million for PLDT and $105 million for BLC, and conditionalities required prior to the completion of the transaction, were contained in a disclosure sent to the Hong Kong Stock Exchange made public on June 5.

PLDT management and its board of directors have opposed the deal with the Gokongwei group and has prevented the conduct by the latter of due diligence investigations, one of the conditionalities contained in the MOA, until it has fully reviewed its implications.

PLDT last July 3 asked a New York court to immediately order First Pacific to submit a copy of the agreement to the US SEC. The court gave First Pacific until next week to show cause why it should not be compelled to produce a copy.

But even before the July 23 deadline set by the court, First Pacific said it will make an additional filing with the US SEC ‘solely for the purpose of ending what it considers to be an unnecessary use of PLDT resources, in the form of legal proceedings brought by PLDT in a US Federal District Court, solely for the purpose of obtaining a copy of the MOA.’

"In taking its action to disclose the MOA, First Pacific will have responded fully to the specific relief requested by PLDT from the US Federal District Court," it said.

An earlier attempt by PLDT to ask First Pacific a copy of the MOA was rejected by the latter. This forced PLDT to seek court intervention to force First Pacific to produce a copy.

First Pacific said it believes it has already disclosed the material terms and conditions of the MOA last June 5 in accordance with the HKSE listing rules on notifiable transactions. It added that it is confident that the disclosures made comply in all materials respects with the requirements of the US Securities Exchange Act.

It also pointed out that the submission of the MOA for filing with the relevant regulatory authorities in the US will end baseless speculations about the correctness of First Pacific’s originally stated position to PLDT ‘and will obviate the need to persist in legal proceedings simply to prove a technical point.’

"First Pacific trusts that its action will encourage PLDT’s management to avoid any further waste of time and expense pursuing an unwarranted legal claim using funds belonging to shareholders, including First Pacific itself, which has a 24.4 percent interest in PDLT. The board further believes that it would be more productive for PLDT’s management to continue to focus its efforts upon operational matters," the Hong Kong-based conglomerate said.

Commenting on the litigation, First Pacific executive directors and general counsel Ronald Brown said that while "PLDT filed its lawsuit on July 3 alleging certain material deficiencies in First Pacific’s US disclosure ostensibly to protect PLDT shareholders, only a week before this lawsuit was initiated. PLDT – which has the obligation to make full and fair disclosure in its own public documents – used a summary of First Pacific’s disclosure in PLDT’s filings with the US SEC, without mentioning any of the same alleged deficiencies to its shareholders."

For its part, PLDT said it was unfortunate that it was compelled to institute legal proceedings to require First Pacific to comply with disclosure obligations, saying it was a reasonable measure to secure full and fair information on behalf of itself and its shareholders.

It added that contrary to Brown’s claim, the PLDT board and management have remained focused on the operations and affairs of the company and that the litigation has not distracted management from pursuing its business plan "that continues to produce strong and tangible results."