PLDT may get 3 seats in planned Meralco buy-in

MANILA, Philippines - A unit of the Philippine Long Distance Telephone Co. (PLDT) plans to acquire a stake in the Manila Electric Co. (Meralco) which could allow the telecoms giant to secure as much as three board seats in the electricity firm. If approved by its shareholders, PLDT’s acquisition of a 20 percent Meralco stake is also seen to strengthen the Lopez group's control over Metro Manila’s sole electricity distributor. Earlier this week, a fund owned by PLDT employees acquired more than ten percent in the Lopez-led company, entitling PLDT’s Beneficial Trust Fund to a separate board seat in Meralco. The latest announcement corroborated earlier observations that the group of Manuel V. Pangilinan, PLDT chairman, bought Meralco shares to aid the Lopez family in staving off a reported attempt by conglomerate San Miguel Corp. (SMC) to wrest control over the power company. SMC currently holds 27 percent in Meralco, making it the power firm’s second-largest owner. In a disclosure to the Philippine Stock Exchange, PLDT said its board of directors approved “the acquisition of 223 million Meralco shares from the Lopez group." The shares will be acquired by Pilipino Telephone Corp., a PLDT subsidiary. At P90 per share, the P20.07 billion transaction “represents approximately 20 percent of Meralco’s common stock," the disclosure said. The acquisition may allow PLDT to get two board seats in Meralco, a source familiar with the matter said. As part of the transaction, Piltel will purchase P2 billion worth of notes issued by Lopez-led First Philippine Utilities Corp. Not only are these notes exchangeable into 22,222,222 Meralco shares, it will also form part of the 20 percent Meralco shares to be purchased by Piltel. “Under the investment and cooperation agreement executed between PLDT and the Lopez Group, both parties agreed as well on certain governance matters such as the nomination of board of directors and senior management officers," PLDT said. PLDT, the country’s largest telecommunications company, “does not expect to invest further in Meralco beyond this 20 percent stake." Piltel is a wholly-owned subsidiary of Smart Communications, PLDT’s mobile phone unit, which in turn is wholly owned by PLDT. Next: PLDT employee fund acquires 10 percent in Meralco PLDT employee fund acquires 10 percent in Meralco In an earlier separate disclosure, PLDT said its employees fund called the Beneficial Trust Fund (BTF) bought more than 10 percent of Meralco. BTF said it acquired 113.313 million shares, or 10.17 percent of Meralco worth about P10 billion in a space of a little more than a month, from February 3 until March 6. The move boosted share prices to P129 during last week's trading at the PSE, its highest ever since Meralco undertook an initial share sale in 1992. As a result, BTF – established by PLDT’s Benefit Plan and the New Gallant Ltd., incorporated in the British Virgin Islands – was able to get enough shares to qualify for a board seat in Meralco. The BTF nominee will join Meralco’s board members, including four from the Lopez group, another four from SMC, two independent directors, and one seat for Jose P. de Jesus, Meralco’s president and chief operating officer. The four Lopez nominees include the company’s chairman and chief executive officer Manuel M. Lopez, and directors Cesar E. A. Virata, Jose P. Francisco, and Christian S. Monsod. SMC nominees include Ramon S. Ang, currently Meralco's vice-chair and SMC president, directors Aurora T. Calderon, Estelito P. Mendoza, and Eduardo M. Cojuangco Jr., SMC chairman. Two board members – Artemio V. Panganiban and Vicente L. Panlilio – sit as independent directors. Panganiban is also an independent director of GMA Network Inc., the parent company of GMA New Media Inc., which in turn owns Media Merge Corp. that runs GMANews.TV. GMA Network Inc. is a rival of ABS-CBN, a broadcast company owned by the Lopez group. Local fund Global 5000 Investment Inc., which holds about 11 percent of Meralco, is reportedly allied with San Miguel. Earlier, Ang denied that it is gearing up for a proxy war with the Lopez group. The conglomerate remains willing to work alongside the Lopezes, he said. - GMANews.TV