This was the result of an initial analysis by PLDT’s legal and financial advisors of separate copies of the MOA submitted by First Pacific and the Gokongwei group to the US Securities and Exchange Commission and the Philippine SEC last Friday.
As a result, PLDT said it intends to withdraw its request for an injunction filed with a US district court earlier and scheduled for hearing on July 22 asking First Pacific to submit a copy of the MOA to the US SEC. It, however, added that until it has fully evaluated First Pacific’s supplemental filing, it is reserving its right to pursue all legal remedies available to it in respect to the complaint it filed.
PLDT explained that it is clear from its initial analysis that earlier filings and statements made by Gokongwei group patriarch John Gokongwei Jr., First Pacific, and related parties have not been complete and that contrary to statements earlier made by First Pacific, not all material terms and conditions of the agreement were disclosed in previous submissions made to the US SEC and the Hong Kong Stock Exchange, among others.
It noted that contrary to previous filings with the Philippine SEC by Gokongwei and First Pacific general counsel Ronald Brown that JG Summit Holdings is not a party to the MOA, the document shows that JG Summit is clearly a party to the agreement and that John Gokongwei personally signed the MOA on behalf of both the Gokongwei group and JG Summit Holdings.
The MOA basically explained how the transaction will be effected and includes a highly complicated and intricate web of how First Pacific (43.71 percent held by the Salim group) owns 24.4 percent of PLDT through four the former’s subsidiaries as well as the existing shareholding structure of Metro Pacific Corp. and what the structure will be for PLDT and Metro Pacific/BLC after the sale.
First Pacific is selling its entire 24.4 percent interest in PLDT as well as the security interest and rights to 50.4 percent of BLD to a new company to be established in the Philippines to be owned two thirds by the Gokongwei group and one-third by First Pacific.
In the case of BLC, what is actually being sold is the $104 million loan extended by First Pacific subsidiary Larouge BV to Metro Pacific Corp. and secured by 50.4 percent of BLC. Metro Pacific, the local flagship company of First Pacific, owns 69.6 percent of BLC which in turn has a 55 percent interest in Fort Bonifacio Development Corp. (FBDC).
It will also be noted that the copy of the MOA submitted by the Gokongwei group mentioned the Gokongwei ‘family and JF Summit Holdings Inc.’ as the signatory to the MOA. The words ‘family’ and ‘JG Summit Holdings Inc.’ were stricken off by pen during the signing. According to the Philippine SEC, this matter will be investigated. The one submitted by First Pacific to the US SEC, on the one hand, did not scratch out the name ‘JG Summit’ as a signatory.
The submission on July 19 was made despite the Gokongwei group’s earlier position submitted to the local SEC that it is not submitting a copy of the MOA since the commission cannot acquire jurisdiction over a group which is not incorporated. It also earlier stressed that JG Summit and Digital Telecommunications Phils. Inc. are not participating in the transaction.
"Our initial review of the MOA shows that the deal was hastily conceived wit little regard for its impact on PLDT and our shareholders and fails to address significant rights of other shareholders such as the Cojuangco family. It is unfortunate that First Pacific, in direct violation of PLDT’s By-laws, has continued to promote a transaction with parties who are primary competitors of PLDT," the company said in a statement.
In his submission to the Philippine SEC, group chairman emeritus John Gokongwei Jr. explained that a copy of the MOA is being submitted ‘in the interest of transparency and full disclosure and to quell further speculations that certain information have been withheld from the investing public.’
For its part, First Pacific executive director and general counsel Ronald Brown said that they have filed with the US SEC a copy of the MOA, in order to avoid a protracted and expensive legal battle against PLDT which earlier asked a US court to compel First Pacific to submit the MOA to the US SEC. First Pacific made the fling on July 18 (New York Times).
Gokongwei also emphasized in his letter to SEC Chairman Lilia Bautista that while he is currently chairman emeritus of publicly listed firm JG Summit, the holding company of the Gokongwei group of companies, such position is non-executive and merely honorific.
"I have not been authorized by the board of directors of JG Summit to bind the latter nor sign for and on behalf of the company with regard to the transactions contemplated in the MOA nor has the JG Summit board decided to participate in the transaction," he explained.
Gokongwei said the JG Summit board is still meeting tomorrow to discuss the matter of participation in the sale transaction and will make the appropraite disclosure on its decision right after the meeting.
According to the MOA, theagred value of First Pacific’s combined direct and indirect interests in PLDT and BLC is $925 million, of which $616.6 million will be paid by the Gokongwei group to First Pacific in six installments. As soon as the first $100 million is paid in cash upon closing of the transaction, First Pacific will allow the board and management takeover by the Gokongwei group of the operations of PLDT and BLC and will cause the resignation of all of its representatives in the PLDT and BLC board of directors.
Also after the closure, the parties will cause the foreclosure of the Larouge pledge, constituting 50.4 percent of BLD shares by the new offshore company to be established by First Pacific. This offshore company shall be the assignee of the Larouge loan and the transferee of the pledged BLC shares, and eventually the owner of the 40 percent BLC shares after a certain foreclosure and sale. On the one hand, the new onshore company will eventually hold and acquire the 10.4 percent BLD shares from the new offshore company.
The MOA likewise said that the new offshore company shall issue three equal promissory notes for the payment of the principal and inters payments for the Larouge loan and will be secured by way of a pledged by Intalink BV (another First Pacific subsidiary) of its entire shareholdings in the new offshore company and by another pledged by First Pacific and the Gokongwei group of their entire shareholdings in the new onshore company, in both instance, in favor of First Pacific.
As part of the pre-closing reorganization steps, the agreement also provides that First Pacific will transfer the 37.25 percent shares of Metro Pacific Resources Inc. (MPRI) in Metro Pacific Corp. to a separate First Pacific company so that MPRI will be free for any MPC shares and will only own 60 percent shares in Metro Pacific Asset Holdings Inc. (MPAH) and approximately 10.15 percent shares in PLDT and without any debt whatsoever.
MPAHI, a First Pacific subsidiary, owns 13.67 percent of the Philippine Telecommunications Investment Corp. (PTIC) which in turn has a 15.45 interest in PLDT.
In order to effect the transfer its Philippine interests, First Pacific in particular will sell to the Gokongwei group both the MPIL sale shares (Metro Pacific Investment Ltd. which is a company incorporated under Cayman Islands laws and wholly owned by First Pacific) and the 40 percent MPRI shares. MPIL owns 40 percent of MPRI which in turn has a 60 percent in MPAHI, as explained by the complicated existing shareholding structure of PLDT/Metro Pacific. – With Conrado Diaz Jr.