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By Zinnia B. Dela Peña, Reporter
TAIPAN John Gokongwei’s planned buyout of the
Philippine telecommunications and property assets of First Pacific
Co. Ltd was a picture of a perfect deal until Manuel Pangilinan came
out in the open to block the sale.
Pangilinan is the president of dominant carrier
Philippine Long Distance Telephone Co. (PLDT), which is involved in
the deal. He is also chairman of First Pacific of Hong Kong.
What was easily concluded as done deal one or
two months ago became muddled day after day as the mutinous
Pangilinan put up a rabid resistance against the Gokongwei-First
Pacific deal.
Pangilinan, a one-time protégé of the Salims
of Indonesia, is strongly opposed to the $925-million deal hatched
by the First Pacific of Hong Kong that would yield a controlling
stake in PLDT and property developer Bonifacio Land Corp. to the
Gokongwei family. He is also chief executive of PLDT and BLC parent
firm Metro Pacific Corp.
The Gokongweis have put forward an
all-or-nothing proposal to the Salim family to acquire both PLDT and
BLC, making it a two-front war for Pangilinan who has chosen
to engage the combined financial resources of his principals and
Gokongwei.
Gokongwei signed last June 4 a binding
memorandum of agreement with First Pacific to create a joint venture
company that would control a 24.47-percent stake in PLDT. The
24.47-percent stake in PLDT represents the single biggest block with
voting rights of about 31 percent.
Under the deal, the Gokongwei group would pay
about P1,130 per share for the PLDT stake and an amount equivalent
to P50,000 per square meter for the stake in the Fort Bonifacio
Global City.
Believing that the deal would not be beneficial
to the interests of PLDT and MPC, Pangilinan has vowed to take all
the necessary measures to foil the takeover bid of Gokongwei.
He has turned for support to PLDT’s Chair Antonio “Tonyboy”
Cojuangco and Japanese telecoms giant Nippon Telegraph and Telephone
Corp., the second biggest stockholder of PLDT with a 15-percent
stake.
NTT is the pivotal player in the struggle
between First Pacific and the PLDT management as it has the right of
first refusal over the Gokongwei deal.
To match Gokongwei’s package, Pangilinan’s
camp will have to win the backing of NTT, which to date remains
undecided on the issue. The Japanese firm is considering all
possible options regarding the deal.
MVP, as Pangilinan is referred to by colleagues,
has deftly shifted the battle ground from the boardroom to the
courtroom apparently to give his camp more time to come up with a
counter-offer to match or better Gokongwei’s bid should the taipan
manage to elude the legal bombs set off by PLDT management.
Blocking the deal through legal barriers is the
top priority of the Pangilinan camp as PLDT officials are confident
these stumbling blocks on PLDT itself would be enough for now to
fend off Gokongwei’s impending takeover of the country’s largest
phone carrier.
Pangilinan has assured 300 employees of PLDT
that he would still be at the helm and that the negotiations would
be a long process despite moves by the First Pacific to curtail him
access to confidential information regarding the deal due to
potential conflicts of interest.
Far from giving up, Pangilinan has gone to both
the Philippine and US SEC to compel Gokongwei and First Pacific to
lay down their cards which the two have kept close to their chests.
In the eight-page complaint filed before the New
York court two weeks ago, PLDT asked the US district court of New
York to order First Pacific to submit a copy of its joint venture
agreement with the Gokongwei group.
PLDT has asked the court to issue an injunction
to compel First Pacific to fully disclose the contents of its
memorandum of agreement with Gokongwei in compliance with Section 13
(d) of the US Securities Exchange Act of 1934. A copy of the
MOA would be used as the basis of any right of first refusal.
The US Securities law requires persons who have
obtained beneficial ownership of over five percent of any class of
voting equity securities to file a complete disclosure with the US
SEC.
PLDT’s American Depositary Receipts are listed
at the New York Stock Exchange. ADRs are securities sold in
the US that represent shares in a non-US company that have been
deposited in a bank in trust for the investor.
It said First Pacific had violated US Securities
law when it failed to furnish PLDT a copy of the agreement.
PLDT said First Pacific’s continued
withholding of the MOA “would continue to cause irreparable injury
to PLDT and its shareholders. These shareholders are being
forced to trade in PLDT stock without adequate information about who
controls a huge block of PLDT’s stock or the terms and conditions
under which that control will be exercised.”
“The investing pubic is entitled to a level
playing field that does not give undue advantage to First Pacific or
the Gokongwei Group at the expense of other shareholders,” PLDT
further said.
First Pacific argued that it has complied with
the disclosure requirements when it submitted to the US SEC details
of the deal, though it did not provide PLDT a copy of the MOA.
The Securities and Exchange Commission,
meanwhile, has deferred its investigation into a possible disclosure
rules violation by the Gokongwei Group until everything is firmed
up. It, however, will continue to keep a tight lid on the Gokongwei
Group’s moves in acquiring First Pacific stakes in PLDT and BLC to
determine whether JG Summit Holdings Inc. or its subsidiaries would
have possible interests in the joint venture.
“‘They can create a new company to be used
as a vehicle for the joint venture but Gokongwei would not yet be
off the hook because JG Summit may still have indirect interest in
the joint venture,” Justina Callangan, head of the SEC’s
Corporation Finance Department, said.
SEC Chair Lilia R. Bautista, for her part,
said that should the Commission discover at a later date that
Gokongwei’s listed corporations have been involved in the joint
venture deal, the Gokongwei Group would be held liable for deception
or gross misrepresentation.
“We can still run after them because in this
case, the SEC should err in favor of caution rather than make a
mistake later on,” she said.
Capital market observers said that even if the
Gokongwei-First Pacific deal is strictly a matter between private
businesses, the corporate regulator should still step in as it
involves a major Philippine utility firm that is, PLDT.
“Simply because of the sheer size of PLDT and
its economic importance to this country, the SEC should closely
monitor what’s happening with it. The SEC should ensure that
everything is done by the book,” an analyst said.
Gokongwei insisted that his group couldn’t be
compelled to submit disclosures to the SEC because they are not
bound to make the disclosures generally required of reporting
persons/beneficial owners under the SRC. He also insisted that JG
Summit is not part of the joint venture with First Pacific.
SEC admitted that it couldn’t go after the
Gokongwei group to submit disclosures on the joint venture with
First Pacific since it is not a listed company.
By entering into an agreement with First Pacific
in his personal capacity, Gokongwei successfully circumvented the
SEC rules on disclosure. Only those registered with the
securities watchdog are bound by SEC rules.
Section 54 of the Securities Regulation Code
prohibits any person from making “any untrue statement or material
facts required to be stated or necessary to make the statements
therein not misleading. If the SEC finds any violation, it can
suspend or revoke any registration for the offering of securities or
impose a fine of not less than P10,000 or not more than P1 million.
Confusion arose when First Pacific in its
disclosure to the US SEC admitted it had entered into a legally
binding MOA with the Gokongwei family and JG Summit for the
establishment of a joint venture in relation to First Pacific’s
common shares in PLDT and BLC. This was in contrast to
Gokongwei’s repeated insistence JG Summit and subsidiaries are
not party to the deal.
These discrepancies prompted the SEC to look
into Gokongwei and JG Summit’s possible violation of SRC
provisions.
First Pacific Executive Director Ronald Brown
explained that the reference to JG Summit in their disclosure to the
US SEC was “merely descriptive of the various members of the
Gokongwei Group. This is consistent with our Hong Kong Stock
Exchange approved public announcement dated June 5 that referred to
the “Gokongwei group as the “Gokongwei family and their related
companies and other business entities including, without limiting
the generality of JG Summit.”
Under the SRC, listed companies are required to
submit to SEC within five days full, fair and accurate reports of
every material fact which could affect investors’ decisions.
Other legal issues that may be raised by the
Pangilinan group are the five-year lock-up provision barring First
Pacific from selling PLDT shares under holding company Philippine
Telecommunications Investment Corp. until 2003 and the option of
Cojuangco to buy back First Pacific’s stake under the 1998
agreement.
The Pangilinan camp may also cite the
conflict-of-interest provision under Article V of PLDT’s corporate
rules which prevents individuals engaged in any business that
competes with or is antagonistic to PLDT and its subsidiaries are
disqualified from sitting as director of the company.
This is the same poison pill that businessman
Andres Soriano III used to prevent Gokongwei from sitting on the
board of food and beverage giant San Miguel Corp. Gokongwei
owns food manufacturing unit, Universal Robina Corp.
Pangilinan has recruited Wall Street financial
services giant JP Morgan as strategist and adviser for a proposed
management aided buyout of First Pacific’s holdings in PLDT and
BLC.
The Gokongweis, on the other hand, are
reportedly getting advice from Citibank Salomon Smith Barney and
Goldman Sachs. First Pacific, on the other hand, has ING
Barings and Credit Suisse First Boston on its side.
Should the Pangilinan camp offer a better offer
for First Pacific’s stakes in both PLDT and BLC, the Hongkong-based
conglomerate is left with no other choice but to junk the deal with
the Gokongweis and accept the superior bid.
The respective boards of PLDT and Metro Pacific
said they would block a due-diligence audit by the Gokongwei Group.
In case of a counter offer, the Gokongwei camp
said it is willing to give up its bid on the Philippine property and
telecommunication interests of the Hong Kong-based First Pacific and
instead use its money for Digital Telecommunications Phils. Inc. (Digitel),
its telecommunications unit.
The Gokongweis are serious in establishing a
formidable foothold in the telecommunication business. They
are expanding the existing fixed line business of Digitel by going
into mobile phone services.
Some stock market analysts are saying that a
bidding war could benefit PLDT shareholders as the transaction price
could go up.
Share prices of PLDT have been falling on
worries that a looming legal battle for control of the
telecommunications giant would not be beneficial.
PLDT has blamed First Pacific and Gokongwei for
the freefall in its share prices. It said the lack of proper
disclosures on the joint venture agreement between the two parties
has significantly affected investor sentiment on the nation’s
biggest phone company.
PLDT Corporate Secretary Ma. Lourdes Rausa-Chan
expressed optimism that the firm’s share price will eventually go
up because its business fundamentals continue to be sound.
“We believe the fundamentals of our business
are sound and once stability is returned to our shareholder base,
the market will respond accordingly,” Chan said.
Aside from the Gokongwei buy-in issue, other
factors said to be contributing to the slide of PLDT’s share price
include the company’s debt restructuring suit it filed with the
United States SEC against First Pacific and the recent negative
rating it got from international ratings agency Moody’s Investor
Service.
PLDT is currently raising funds to meet debt
obligation worth P1.3 billion due 2002 to 2004.
Moody’s, on the other hand, downgraded
PLDT’s outlook to negative from stable on concerns of its
financial problems.
Chan, however, said PLDT continues to
pursue its liability management program of which certain key
components are already in place. The telecommunications giant,
she said, continues to make progress on other ongoing financing
initiatives which it hopes to complete over the next few months.
The Gokongweis, however, are confident that a
deal could be concluded in the third quarter of the year despite the
legal roadblocks set up by Pangilinan’s group.
First Pacific executive vice president Rebecca
Brown said the company “will continue its constructive dialogue
with NTT with a view toward achieving a mutually satisfactory
resolution of the issues that the proposed transaction raise for NTT
and First Pacific as current and future shareholder partners in PLDT.”
In assuring NTT, First Pacific said that unless
agreed to, there will be no transfer of any PLDT and PTIC shares
which are subject to the shareholders agreement, to a strategic
investor at any time prior to March 24, 2003.
NTT is reportedly evaluating the technical and
management expertise of the Gokongweis in running a
telecommunications company. The Gokongwei’s Digitel is the
country’s second largest landline service provider. It has
been in operation since the early 90’s and now has over 400,000
subscribers all over Luzon.
Indonesia’s Salim family — whose
ancestors built a fortune in a classic rags-to-riches story, has
agreed to sell their crown jewels in the Philippines to cut their
losses and focus on more stable consumer goods businesses.
The Salims business empire in the Philippines is
controlled by the Hong Kong-based First Pacific through the
locally-listed MPC and PLDT.
The Salims, recruited Pangilinan, a Wharton
School-educated Filipino, in February 1999 and put him in charge of
building up the once obscure investment house into a regional
although ailing powerhouse that is now.
First Pacific, a blue-chip Hong Kong company,
saw its stock price soar eleven-fold in the four years to 1996 on
the strength of its deal-making ability. It sold $2.7 billion worth
of assets to buy Asian franchises that dominate their local markets.
PLDT was one of the assets First Pacific took
control of in November 1998.
At the end of 2001, the once high-flying company
was but a shadow of its old self, battered by the Southeast Asian
currency crisis and weighed down by huge foreign debts.
Once Indonesia’s largest conglomerate, the
powerful Salim Group has had to give up stakes in more than 100
companies to the state after its Bank Central Asia crashed in the
Asian financial crisis in the late 1990’s.
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