Maharlika deal to buy 10% of NGCP 'imminent'

According to a report by InsiderPH, “deal insiders” are saying that the Maharlika Investment Fund (MIF) [link] and the National Grid Corporation of the Philippines (NGCP) are close to concluding talks on the MIF’s acquisition of a 10% interest in NGCP. Those insiders say that the main sticking point has been price, with NGCP’s owners (Big Boy Sy and Robert Coyiuto) obviously seeking a much higher price than MIF’s original offer price, which was apparently based on the market price of Synergy Grid [SGP 12.90 ?4.4%; 297% avgVol], the listed holding company that owns Mr. Sy’s and Mr. Coyiuto’s portion of NGCP.

The latest news is that MIF has upped its offer “substantially” and that the owners are “amenable to saying ‘yes’ despite the fact that small pricing gap that still exists.”

MB BOTTOM-LINE:  SGP’s stock price is up almost 50% over the past month on extremely heavy volume, but it isn’t clear how any of this MIF talk will benefit SGP shareholders. While the MIF may have based its original offer on the implied value of NGCP as a function of SGP’s market price, all of the chatter I’ve seen--from when these rumors started years ago--has been about MIF buying shares of NGCP directly. Not in SGP (like us mere mortals), but in the actual transmission grid monopoly itself.

China’s 40% stake in NGCP was the reason MIF seemed to target NGCP in the first place, under the theory that getting China out of NGCP was a national security concern worthy of MIF’s money. Even if we assume that MIF will invest directly in NGCP, the next question that comes up is whether the deal will be in secondary shares (from an existing shareholder) or primary shares (sold from NGCP). If the deal is with an existing shareholder, then whatever amount MIF is willing to pay will just go to that private shareholder, and NGCP itself will see none of the money. Will SGP sell part of its interest to MIF, or will the deep subsidiaries of SGP sell part of their stake? Will China sell some? If the deal is primary shares, then whatever MIF pays will go directly to NGCP’s bank account for use in whatever it is that NGCP decides to do. What will NGCP do with this money? NGCP has never been without money, it’s just been without competition and competent oversight. None of those factors will change with MIF’s entrance.

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