A group of PRCI stockholders represented by Ramon Balatbat wrote the Securities and Exchange Commission and the Philippine Stock Exchange for their assistance in investigating and determining the liabilities of the board and management in relation to the sale of a four-to-six hectare lot at the Sta. Ana Race Park in Makati.
The stockholders said they "vehemently oppose the board’s approval of the above spin-off and purported sale and development plans of the board as being, among others, contrary to the legislative franchise of PRCI, beyond the scope of the club’s authority under its corporate charter, and prejudicial to the interest of the minority stockholders."
Last May 28, PRCI disclosed the sale of its interest in wholly-owned subsidiary Sta. Ana Park Square Holdings Inc. to Precision Holdings & Equities Corp., a consortium of local investors, for P600 million.
Sta. Ana Park Square was pun off last year and was assigned a portion of the total 25.6-hectare property, or about six hectares, of the Makati racetrack to pay for PRCI’s subscription to its capital stock.
PRCI officials said the sale to Precision was part of PRCI’s plans to raise funds that would enable it to service/pay its loan obligation to Allied Bank and to complete the development of a new racetrack site in Cavite.
But Balatbat’s group argued the transaction runs contrary to PRCI’s franchise, which only covers the conduct of the racetrack business, leaving no room for real estate development unless related to the business.
The group also questioned the corporate authority of the board in approving the spin-off and sale of the property, pointing out that these acts are outside of the company’s Amended Articles of Incorporation and By-Laws.
Also, the group bewailed the fact that there was no sufficient disclosure nor notice of the deal in the firms’ annual stockholders meeting held last July 24. "Instead, during the stockholders’ meeting, the board misled stockholders by seeking approval and ratification of the spin-off as merely a regular and ordinary act of the board and management in the usual course of the club’s business."
Balatbat said the minority group even proposed that the board reconsider the transaction in view of the legal issues tied to it as well as the continued weakness of the economy and prevailing market sentiment in the real estate industry does not justify the spin-off and sale.
The group added there are less contentious alternatives in raising capital such as a pre-emptive rights offer or the placement of new shares may be a more viable solution to the company’s capital raising scheme.
In response, PRCI corporate secretary and legal counsel Jesusito Manalo, however, contested Balatbat’s "rather erroneous and mistaken contentions" and said the claims have no basis.
Manalo argued that while the PRCI franchise does not expressly state that it can sell and/or develop its real estate assets, "neither does the franchise prohibit the company from doing so."
"The absence of an express provision does not necessarily mean that the company is prohibited from disposing its property, particularly when the same is intended to achieve the purposes for which its was created," Manalo said.
He pointed out that the legal justification is simple: The franchise granted to PRCI has the privilege and authority to maintain one racetrack in Makati, Cavite, Rizal and Laguna. Hence, it is but logical for the company to raise funds by whatever means, including the disposal and/or development of its Makati property to enable it to obtain the necessary funds to develop the Cavite racetrack.
Manalo also said the board’s authority to dispose of its real estate assets is an inherent and general power of any corporation under Sec. 36 of the Corporation Code.
PRC was established in 1935 and was listed in 1952, making it one of the country’s oldest race clubs. It operates a nationwide network of off-track betting stations equipped by computerized facilities.
As part of its corporate restructuring, its real estate assets have been transferredto an affiliate company, the investment holding firm Ebecom Holdings Inc. controlled by the family of former Finance Secretary Edgardo Espitiru.
At present, PRCI is focused on its plan to relocate its race site in Makati and transform it into a commercialy/residential district.
Incidentally, another racetrack operator, the Manila Jockey Club which operates the San Lazaro racetrack in Tayuman, Manila is also relocating its facilities in Cavite to give way for the old site’s conversion into a commercial district anchored by the SM mall.