And the deal is done.
Maharlika Investment Corp. (MIC), the state-owned corporation that manages the country’s sovereign wealth fund, has made its first ever investment – a 20 percent stake in the National Grid Corp. of the Philippines.
On Sunday, sources said that the negotiations between Maharlika and NGCP have concluded although some details were still being threshed out at the time.
Yesterday afternoon, following a signing at the Palace, Malacañang announced that the deal was done. MIC president and CEO Rafael Consing Jr. and SGP chairman Henry “Big Boy” Sy Jr. signed the agreement in a ceremony witnessed by President Marcos.
It wasn’t a walk in the park though. The horse trading was intense, at times held at Maharlika’s headquarters in Bonifacio Global City or at NGCP’s office in San Juan.
But after months of exhausting negotiations, Big Boy himself was relieved that the talks had concluded, a source said.
In its announcement, the Palace said Synergy Grid and Development Philippines Inc. (SGP) has accepted a binding offer from the Marcos administration, through the MIC, for a 20 percent stake to secure a foothold in NGCP.
Under the binding term sheet, MIC will subscribe to preferred shares offered by SGP.
SGP holds a 40.2 percent effective ownership interest in NGCP, the country’s power grid operator. Consing said the deal would grant MIC two board seats each at SGP and NGCP.
“Once the acquisition is completed, we shall be entitled to two out of nine seats in the SGP board, after the total seats are increased from seven to nine. At NGCP, the government gains representation through two out of 15 board seats, following an increase in the total seats from 10 to 15,” Consing said.
NGCP is owned by Sy and another Filipino tycoon, Robert “RCJ” Coyiuto Jr., with their technical partner State Grid of China, which holds a 40 percent stake.
Currently, the NGCP board is chaired by Zhu Guangchao (Chinese), while Sy and Coyiuto serve as co-vice chairmen. Members include Jose Pardo, Francis Chua, Yao Yousheng (Chinese), Wang Lijin (Chinese), Anthony Almeda, Liu Xinhua (Chinese) and Paul Sagayo Jr.
Now the next question on everyone’s mind is this – what was the price that convinced tycoons Big Boy and RCJ to let Maharlika in?
According to the grapevine, the two tycoons wanted a price closer to P20 per share due to NGCP’s future growth potential compared to SGP’s current share price of P12.90 per share.
As I said in an earlier column, US-based investment fund manager Eric Jurado’s valuation analysis puts SGP’s fair price at P10.20 per share, based on earnings growth of 4.4 percent per year over the past five years. This equates to an expected shareholder return of 10.4 percent per year over the next five years.
As for the total acquisition cost, we can only speculate for now while waiting for more details.
Our energy reporter Brix Lelis quoted an analyst who said that Maharlika may invest as much as P8.5 billion to secure at least a 10-percent stake SGP.
“Assuming the Maharlika Fund acquires a 10-percent interest or around 526 million shares of SGP, Peter Garnace of Unicapital Inc. estimates that a ‘fair value’ should range from P6 billion to P8.5 billion, or P12 to P16.10 per share.
“Based on previous equity transactions (that is) 2021 FOO (follow-on offering), SGP was priced at P12 apiece,” Garnace told The STAR.”
Lelis’ report also said that based on the company’s book value, it is valued at P20.13 per share as of September 2024.
Unicapital’s Garnace said: “Hence, by applying a minority discount, we arrive at an adjusted fair value of P8.5 billion or P16.10 per share.”
Questions remain
For analyst Nicky Franco of Abacus Securities, however, the question shouldn’t be about the price but whether or not it’s a worthy investment for Maharlika.
These are points that Maharlika needs to explain to the public, especially because it is a sovereign wealth fund whose initial capitalization is from government-owned banks.
Launched at WEF 2023
For now, what is clear is that after all the controversies surrounding it, the Switzerland-launched sovereign wealth fund has finally come up with a maiden investment two years after Marcos trumpeted Maharlika at the World Economic Forum (WEF) in January 2023.
At the recent WEF last week, the Philippine government’s delegation, led by House Speaker Martin Romualdez and Finance Secretary Ralph Recto, likewise touted the sovereign wealth fund.
The pressure is now on Maharlika to show that its investment in NGCP is justified.
More importantly, the Marcos administration must be ready to answer if investors raise concerns about the sovereign wealth fund.
For instance, can Maharlika just acquire a stake in any company whether or not shareholders like it, just as it did in NGCP? Or should I just be asking what’s the next target after the grid operator?
Only time will tell. We’ll just have to wait and see what happens next.
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Email: eyesgonzales@gmail.com. Follow her on Twitter @eyesgonzales. Column archives at EyesWideOpen on FB.