IF there is one who CAN save the two major businesses of the Indonesian-controlled First Pacific Co. Ltd. in the Philippines, it is businessman John Gokongwei Jr. using the family’s JG Summit Holdings Inc.
Manuel Pangilinan, FirstPac’s top man in the country, probably, does see in Gokongwei the messiah he needs even if he has been playing it safe by seeking the legal opinion of the Securities and Exchange Commission (SEC) in his every move. He needs caution, since he has been into takeover game since December 2005 when the Indonesian group bought Metro Drug Inc. and turned it into a holding company.
FirstPac’s cautious strategy has paid off because the SEC, which is the government regulatory agency that determines the legality or illegality of the ownership profile of private stock corporations, has allowed the dilution by preferred non-voting shares of the foreign ownership in Philippine Long Distance Telephone Co. (PLDT). With the SEC’s imprimatur, First Pacific gained control of PLDT, the Philippines’s largest telecommunications conglomerate.
Then the Supreme Court ruled that PLDT has, in fact, has been controlled by foreigners. It decided two years ago that preferred non-voting shares that PLDT issued to subscribers should not be counted in determining the ratio of ownership between Filipinos and foreigners.
In effect, the High Tribunal ruled against the SEC’s definition of Filipino’s 60-percent majority by disallowing the inclusion of non-voting preferred shares in the computation. The SEC was wrong, according to the High Tribunal, in favoring PLDT with a legal opinion that tolerated FirstPac’s majority ownership in excess of 40 percent the Constitution allows foreigners to own in public utilities.
With the High Tribunal’s adverse ruling, it was time for FirstPac to look for a strategic partner. Whether it searched for one and found it in JG Summit is not clear based only on postings on the website of the Philippine Stock Exchange.
Gokongwei, through his family’s JG Summit Holdings Inc., became a PLDT significant stockholder with more than 10 percent of common voting shares. He did not buy into PLDT.
Instead, he got paid in PLDT common shares for JG Summit holdings in Digital Telecommunications Philippines Inc. His ownership though has been diluted to a little over 4 percent by PLDT’s issuance of 150 million voting preferred shares to enable the company to comply with the 60-percent to 40-percent ownership ratio in favor of Filipino stockholders.
With the Gokongweis in, PLDT is finally safe from anyone trying to look for new loopholes in its ownership composition. There would be no more Gamboas to find anything wrong in FirstPac’s ownership, as JG Summit could successfully provide the defense against antagonistic attack against the Indonesian group.
Will anyone among the public investors seek the disclosure of what strategy PLDT would take in case of a new inimical threat to the FirstPac’s ownership in the telecom group?
PLDT’s lawyers may be able to provide the answer. Maybe lawyer Perry Pe, the son-in-law of Gokongwei, may also have studied the intricacies of any acquisition that he may be able to anticipate any potential threat to JG Summit’s holdings in PLDT.
As it does in PLDT, JG Summit could play a similar role in Manila Electric Co. (Meralco). The family patriarch ended up owning 27.12 percent in Meralco after buying last year 305.69 million Meralco shares from San Miguel Corp. at P235 each. As the Gokongweis’ holding company, JG Summit could play the role of messiah in case of question of foreign ownership in Meralco arises. Again, only JG Summit’s lawyers know how to parry any attempt against FirstPac’s ownership in the electricity retailer.
Are there loopholes that anyone among the public investors could raise against PLDT and Meralco? The answer is yes.
What are lawyers for if they would not see anything questionable in any kind of deal? Even a layman who is not well-versed in the law could find something amiss in every corporate transaction, especially of companies that are listed on the Philippine Stock Exchange.
Some years ago even before the Supreme Court’s ownership ruling, Due Diligencer made an analysis of the foreign equity in PLDT and Meralco. Its finding: FirstPac owned more that the legally allowed 40 percent in both. Fortunately, the violation may have already been corrected by the entry of the Gokongweis in the two utility companies. Due Diligencer used the word “may” because someone out there would be doing a Gamboa by trying to find something in the FirstPac-Gokongwei deal that could be questioned before the High Tribunal.