Metro Pacific ups tender offer to P5.20 per share
Metro Pacific [MPI suspended] [link] said that the consortium of parties looking to take MPI private gave notice of a new tender offer price of P5.20/share, and that its own board of directors had approved a filing for voluntary delisting from the PSE. The new tender offer price represents a 37% premium over MPI’s one-year volume-weighted average price, and is actually ?0.10/share higher than the highest end of the valuation range as provided by Unicapital as part of its valuation opinion.
> What’s the pricing rule? The PSE recently revised the rule for tender offers, which now requires the price to be (at a minimum) the volume-weighted average price of the shares for one year prior to the board’s disclosure of its approval of delisting, or the highest valuation as determined by an independent valuation provider’s fairness opinion, whichever is higher. The attack against the original tender offer price of ?4.63/share is that the range of valuations provided were not produced by an independent valuation provider, with the inference being that an independent valuation provider might come back with a higher range and therefore a higher floor for the tender offer price.
> Why did MPI raise the price? The original tender offer price sparked outrage from investors, commentators, and even some brokers. Some of that sentiment came from the huge difference between the original tender offer and book value of MPI at the time, which was P6.97/share. Still, others were questioning the independence of the group that produced the fairness opinion that formed the basis of that original price. There were even rumors that the PSE itself back-channeled with MPI to force the company to obtain a second fairness opinion from a different valuation provider.
> So is the new price good? The new price certainly appears to satisfy the PSE’s rules, and it is 12% higher than the previous tender offer price. Relative to MPI’s stock price (P3.73/share) before the pre-announcement surge ahead of the first delisting disclosure, this new tender offer price is 39% higher, as compared to the original tender offer price which is just 24% higher. The P5.20/share price is P0.10 higher than the highest valuation as part of Unicapital’s fairness opinion, and it is 37% higher than the 1-year volume weighted price of P3.80/share.
> What’s next? MPI said that it will call a special stockholders' meeting on August 8, with the only item on the agenda being the approval of the voluntary delisting. Assuming enough stockholders vote in favor of the measure, MPI said that the consortium of bidders would “launch the Tender Offer immediately thereafter”.
> So who won? In my opinion, there are no losers here. The PSE gets to take a victory lap for having pushed MPI to sweeten the deal for shareholders before leaving. MPI gets the PR benefit of a higher price which is still substantially lower than book value. Long-time MPI shareholders have a significantly-higher exit price now than they had just a few months before, and MPI tender offer traders who bought in anticipation of a higher price have been rewarded for taking that risk. All of the brokers and fund managers that cried so loudly at the first price now get to feel like they forced the mighty MPI to cave and offer a higher price. Even Unicapital got paid to conduct the second fairness opinion.
MB BOTTOM-LINE
There are some vocal critics of the new price that are still stuck on how low it is relative to book value, but the funny part (to me at least) is that MPI’s management team largely shares those exact same frustrations.
We can debate how good or bad MPI has been at delivering shareholder value all day long, but the fact is that the market has simply not been willing to pay anywhere near MPI’s book value for... ever? That differential is what makes taking the company private so appealing as a means of maximizing shareholder value. It’s always been possible for anyone in the market to soak up a huge position in MPI at a price far below that mythical book value, and if there was real interest in doing so, we’d expect MPI’s share price to rise as a result of the demand that would arise from that belief. But the market doesn’t lie. The market doesn’t believe the stock is worth that much. The delisting is not a sure-thing, and the same risk/reward matrix applies to this potential tender offer as would have applied to the previous one.
What you should do as an investor and a potential shareholder of MPI depends on your own goals and your own risk tolerances. There is no single correct answer that will apply to every person’s situation. For some, it might make sense to flip out of MPI before the tender at the current elevated price. For others, they might want to make a stand and refuse to tender in hopes of forcing an even higher price. It’s possible that MPI could be encouraged by the prospect of poor take-up to raise the price. But it’s also possible for MPI to push ahead and for holdouts to be left holding stock in a delisted company.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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