Metro Pacific, Piltel to form new holding firm for Meralco stake

MANILA, Philippines - Metro Pacific Investments Corp. (MPIC) and sister firm Pilipino Telephone Corp. (Piltel) are studying the possibility of creating a new holding company to consolidate their investments in power utility giant Manila Electric Co. (Meralco).

“MPIC and Piltel are presently in discussion with regard to a proposed combination and reorganization of their respective shareholdings in Meralco, with a view to consolidating their Meralco shareholdings in a new holding company,” said the two companies affiliated with Hong Kong-based conglomerate First Pacific Co. Ltd. in separate disclosures to the Philippine Stock Exchange.

Both companies said the terms of the reorganization are being finalized and that they will make the necessary announcement shortly.

“Both parties are in the process of finalizing the required documentation and obtaining the necessary consents,” MPIC said.

First Pacific currently has a 34.7-percent aggregate interest in Meralco through MPIC (20 percent) and Piltel (14.7 percent).

The group’s shareholdings in Meralco may increase to 41.4 percent should the local holding firm of telecommunications magnate Manuel V. Pangilinan exercise its option to acquire an additional 6.7 percent stake from the Lopez family at P300 each share worth a total P22.4 billion.

The deadline for the call option has been moved twice from the original date of Jan. 1. It was first extended until Jan. 29 and then Feb. 28.

The Lopez family’s stake in the country’s largest power distribution utility will go down to 6.7 percent should MPIC exercise its option.

In spite of the delays, MPIC still seems bent on raising its stake in Meralco, saying the funding for the additional 6.7 percent stake has been agreed with a syndicate of banks and with parent firm First Pacific.

Share prices of MPIC have suffered a beating in the stock market as investors dumped the stock on concerns it was encountering cash problems given the second extension of the signing of a call option deal on its purchase of more Meralco shares.

But MPIC rose to as high as P2.32 before closing unchanged at P2.22 yesterday while Meralco rose 1.87 percent to P163 apiece.

MPIC also pointed out that the standstill arrangement preventing the sale of any of the remaining Meralco shares owned by the Lopez Group to third parties for a period of three years, “serves to stabilize the ownership”of the country’s largest power distributor.

The Lopez Group sold a 20 percent stake in Meralco to PLDT in March 2009  for $414 million and votes its remaining holdings with the Pangilinan group. Together they control 48 percent of the utility while about nine percent is held by the public.

San Miguel Corp., on the other hand, holds a 27 percent interest in Meralco while ally Global  5000 Investments, headed by former Trade and Industry Minister Roberto V. Ongpin, owns eight to 10 percent.

Meralco owns the country’s largest power franchise and has become an attractive target after regulators allowed it to raise power tariffs by up to 27 percent, its first hike since 2003.