ABS-CBN nixes shareholders’ preemptive rights

MANILA, Philippines - Broadcast giant ABS-CBN Corp. is taking in financial investors soon to raise funds to bankroll the company’s initiatives including the impending shift to digital television as mandated by the National Telecommunications Commission (NTC).

ABS-CBN chairman and chief executive officer Eugenio L. Lopez III said in a press conference after the company’s stockholders’ meeting that the broadcast giant is in discussions with potential financial investors.

“We are now looking for a strategic investor, primarily financial investors,” Lopez stressed.

During the annual meeting, the company’s stockholders ratified the amendments to the Articles of Incorporation removing the preemptive rights of shareholders in the stocks that would be issued or disposed of by the company.

“There is one very good reason for this. The preemptive rights provision in the articles of incorporation restricts a listed company’s flexibility in raising equity funding. Often the need arises for a company to quickly avail of opportunities offered by favorable market conditions to obtain the highest possible price for the security it is offering. With the preemptive rights provision in its articles, it becomes highly impossible,” he said.

Under the law, he said ABS-CBN has to go through a tedious and lengthy rights offering process.

“Thus by the time the legal requirements are met the market conditions may no longer be attractive,” he explained.

He pointed out that ABS-CBN is one of the few listed companies that grant stockholders preemptive rights to share issuances and dispositions while most Philippine listed companies such as BDO Unibank, the Metropolitan Bank & Trust Co., JG Summit Holdings, GT Capital, Metro Pacific Investments Corp. (MPIC), diversified conglomerate San Miguel Corp. (SMC), and even rival GMA Network Inc. do not allow preemptive rights to shareholders.

Despite the approval, the company’s chairman assured that ABS-CBN would continue to protect the interest of the shareholders as it is under the watch of the Philippine Stock Exchange (PSE).

“This amendment being proposed if approved does not, however, mean that minority stockholders are no longer protected. The PSE requires the rights offering in certain circumstances,” Lopez said.

According to him, proceeds of any fund raising activity being arranged by ING would be used to finance initiatives being undertaken by ABS-CBN such as the shift to digital TV as mandated by the government regulator.

“We have several program initiatives, one of them is very well known to all of you. One of them is the digital terrestrial television which we expect the government to approve. There are other initiatives, but we are not at liberty to say what these are. It will become public knowledge in the next three months,” he added.

The NTC has endorsed anew to the Department of Science and Technology (DOST) the adoption of the Japanese standard – Integrated Service Digital Broadcasting-Terrestrial or ISDB-T standard – instead of Europe’s Digital Video Broadcasting-Terrestrial 2 or DVB-T2 for the Philippines’ migration to digital terrestrial TV by 2015.

The NTC was supposed to issue the implementing rules and regulations for digital TV in July 2010 but was delayed because after Malacañang ordered a review. As early as 2010, the agency issued an order adopting ISDB-T as the standard.