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MPIC, Piltel to form Meralco holding firm

02/09/2010

Hong Kong’s First Pacific Co. Ltd. units Metro Pacific Investments Corp. (MPIC) and Pilipino Telephone Corp. (Piltel) plan to put up a new holding company called Newco to consolidate the Philippine Long Distance and Telephone Co. (PLDT) group’s stake in dominant electricity distributor Manila Electric Co. (Meralco).

MPIC said in a press statement that officials of both firms are in discussion with regard to a proposed combination and reorganization of their respective shareholdings in Meralco.

MPIC and First Philippine Holdings Corp. (FPHC) of the Lopez group have announced last Jan. 29 the extension of the deadline on the call option under the term sheet for MPIC’s acquisition of 6.6 percent shares in Meralco held by FPHC issued on Nov. 5 last year and last Feb. 28.

“Funding for (the purchase of) these 6.6 percent Meralco shares have been agreed with a syndicate of banks and with First Pacific Co. Ltd., MPIC’s principal shareholder, subject to the requisite board approvals and documentation. This will enable MPIC to fund the acquisition of the 6.6 percent Meralco shares should it decide to exercise the call option,” the statement read.

The terms of the reorganization are being finalized by MPIC and Piltel and an announcement in this regard will be made shortly, it added.

The latest deal, if it pushes through, will allow the Metro Pacific-PLDT bloc to hike its interest in Meralco to 41.4 percent from 34.7 percent. The Lopezes will reduce their stake to 6.7 percent from 13.4 percent.

Both parties are in the process of finalizing the required documentation and obtaining the necessary consents, MPIC said.

In the meantime, the standstill arrangement with the Lopez Group under the Amended, Consolidated and Restated Cooperation Agreement between the MPIC-Piltel Group and the Lopez Group, serves to stabilize the ownership of Meralco, it said.

Under the Standstill Arrangement, the Lopez Group agreed that for a period of three years, it will not sell

or transfer any shares of voting common stock in Meralco which it owns except to MPIC subject to permitted sale of insignificant number of Meralco shares to third persons under certain conditions.

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