Ayala exits Manila Water

Sells remaining stake to Razon for P14.5 billion

MANILA, Philippines — Conglomerate Ayala Corp. has completed one of its major divestment plans for the year, selling its remaining stake in its East Zone water business to ports and power tycoon Enrique Razon for P14.5 billion.

The divestment of Ayala’s interest in Manila Water Co. Inc. is part of the conglomerate‘s rationalization strategy to slash its debt and prepare for future investments.

“The transactions are aligned with AC’s strategy to rationalize its portfolio and raise P50 billion in proceeds. With these transactions, the total proceeds raised from AC’s portfolio rationalization initiatives will be P51.5 billion,” Ayala Corp. said in a disclosure to the Philippine Stock Exchange yesterday.

Manila Water is the government’s concessionaire for managing the water services in the East Zone of Metro Manila, catering to more than seven million residents in 24 cities and municipalities.

It entered into a concession agreement with Metropolitan Waterworks and Sewerage System in August 1997 following a historic water privatization bidding by the Philippine government.

Ayala and its two wholly owned units sold 1.45 billion in combined common and preferred shares in the water firm – representing a 23.6 percent stake – to Trident Water Co. Holdings Inc., a subsidiary of the Razon Group’s Prime Infrastructure Holdings Inc.

Ayala and its subsidiary Michigan Holdings Inc. executed a special block sale with Trident covering 578 million common shares priced at P22.361 each.

The pricing was based on a 30-day volume-weighted average price as of May 16, 2024, less a 7.2 percent block discount.

Philwater Holdings Co. Inc., another subsidiary of Ayala Corp., sold its 872 million preferred shares in Manila Water to Trident through the execution of a deed of absolute sale.

The preferred shares were sold at a negotiated price of P1.844 apiece.

Ayala said the sale of the common shares would yield P12.9 billion while the preferred shares would raise P1.6 billion, for a total of P14.5 billion.

The payment for the preferred shares would be on a staggered basis spread over 2024 to 2029, the firm added.

After the transactions, the Ayalas will no longer hold even a single common share in Manila Water and it will lose its voting stake in the company.

However, Ayala Corp. would retain a 12.08 percent economic stake in the water business through the preferred shares.

“Once the preferred shares have been fully paid for in 2029, Ayala’s economic stake in Manila Water will drop to zero,” it said.

At the end of 2023, Trident Water held an economic and voting stakes of 36.92 percent and 58.32 percent, respectively, in Manila Water.

Following yesterday’s divestment, Ayala appointees to the board of Manila Water, Alberto de Larrazabal and Karl Kendrick Chua, tendered their resignation.

Larrazabal, who is the CFO of Ayala, joined Manila Water’s board in September 2022.

Chua, a former secretary of the National Economic and Development Authority secretary, ceased to be a member of the firm’s Executive Committee and Talent and Remuneration Committee. Chua joined Manila Water’s board in April.

Two years ago, Ayala Corp. announced its plan to divest assets which it no longer controls to raise $1 billion, now equivalent to roughly P57 billion at the prevailing exchange rate.

The sale of non-core assets is meant to recycle capital to focus on the expansion of its core business such as power, banking and telecommunications while developing healthcare and logistics.