GSIS demands tender offer from Metro Pac

MANILA, Philippines - Far from giving up its fight, state-run pension fund Government Service Insurance System (GSIS) has formally demanded Metro Pacific Investments Corp. (MPIC) to comply with the tender offer rule, threatening to exhaust all legal remedies should MPIC fail to do so.

In a letter to MPIC chairman Manuel V. Pangilinan dated Nov. 11, 2009, GSIS chief legal counsel Estrella Elamparo said the listed holding firm’s impending acquisition of an additional 6.7-percent stake in Manila Electric Co. (Meralco) is covered by the Securities and Exchange Commission’s tender offer rules. The sale will bring the MPIC/First Pacific Group’s total holdings in Meralco to 41.4 percent when the sale is completed, she said.

The tender offer rule as prescribed under the Securities Regulation Code requires any entity or person who acquires at least 35 percent of a listed company to offer to buy out other shareholders at the same price agreed upon with the block seller.

GSIS owns four percent of Meralco, the country’s largest power retailer.

Last week, the MPIC-First Pacific Group forged a deal with Lopez-owned First Philippine Holdings Corp. to acquire 74.7 million shares — or half of the Lopezes’ holdings — in Meralco for $471 million (approximately P22.4 billion). The deal was structured in the form of a loan and a call option, exerciseable until March 31, 2010.

Elamparo said the transaction was “disguised as a loan coupled with a call option over the Meralco shares, such artifice was obviously resorted to for the sole purpose of circumventing the tender offer requirement of the law.”

“In view of the foregoing, demand is hereby made by GSIS, as a shareholder of Meralco, for MPIC to comply with the law and make a tender offer to all holders of Meralco’s common shares in accordance with Section 19 of the Implementing Rules of the Securities Regulation Code within five days from receipt of this letter,” Elamparo said.

Elamparo said MPIC’s failure to comply with its directive will result in the filing of a case against the Pangilinan-led group.

“Failing compliance, GSIS will be constrained to pursue all civil, criminal and administrative remedies, as may be available, to protect its interests as a shareholder of Meralco,” Elamparo said.

MPIC, however, asserted that “the mere granting of an option to purchase is not a sale or purchase because a call option may or may not be exercised.”

MPIC pointed out that the exercise of the call option is subject to all appropriate corporate approvals including shareholders’ approval of First Pacific if required by the Hong Kong Stock Exchange’s rules governing the listing of securities.

MPIC likewise explained that the mandatory tender offer will be triggered only if the acquisition of 35 percent or more will be made within a 12-month period.

Invoking the stockholder’s right granted under Sec. 74 of the Corporation Code, GSIS has written FPHC requesting for copies of several corporate records to aid them in the evaluation of management acts in entering into an agreement with MPIC.

Among these documents include proposals submitted by MPIC and TriRatna Holdings Corp. for the purchase of FPHC shares in Meralco; board resolution approving MPIC’s proposal; board resolution approving the agreement between FPHC and MPIC; loan agreement between FPHC and MPIC; call option agreement, investment and cooperation agreement and all other documents and records pertaining to said transactions.

GSIS demanded that these documents be forwarded to them within 48 hours from receipt of its letter.