The Philippine Stock Exchange (PSE) has hiked its shareholdings in Philippine Dealing Systems Holdings Corp. (PDS) in line with the goal to merge the trading of stocks and fixed income securities.
In a disclosure to the stock exchange, the PSE said it bought the 3.08-percent PDS stake of Finex Research and Development Foundation Inc. (FINEX) for P69.39 million.
PSE has purchase agreements—completed and ongoing—with minority shareholders of PDS, all amounting to 31.1 percent of PDS.
These deals, which include the FINEX interest, are all subject to the approval of the Securities and Exchange Commission (SEC).
Adding the 31.1 percent from the minority bloc and the current 48.9 percent stake of PSE—20 percent originally held by PSE and 28.9 percent purchased from the Bank Association of the Philippines—the PSE now has a majority control of 80 percent in PDS.
The balance of 20 percent, meanwhile, is still in the hands of Singapore Exchange Ltd., who refuses to let go of its PDS stake, waiting for a hefty price for its investment.
For an additional 3.08 percent shareholdings in PDS, the PSE bought 192,776 PDS shares from FINEX, priced at P360 apiece. The price was determined based on PDS’ total enterprise value of P2.25 billion.
The 70 percent or P48.57 million of the P69.39 million transaction price will be paid at the closing while the balance of 30 percent or P20.8 million will be “held in escrow,” according to the PSE.
“This transaction is envisioned to facilitate further growth in the local capital markets by introducing efficiencies in the trading and back office systems of both the equities and fixed income markets, among others,” the PSE said. “It is aimed at creating a better environment for the introduction of more products and services for the various market stakeholders, as well as the implementation of improvements in risk management processes.”
PDS is the parent firm of Philippine Dealing and Exchange Commission (PDEX), which operates as an exchange for the trading of fixed income securities, such as corporate debt notes or bonds.
Before the merger and acquisition plans, PSE owned 20 percent of the PDS, while the other stakeholders were BAP (28.9 percent), SGX (20 percent) and the other minority shareholders (31.1 percent).
The PSE is looking at transforming the system of the PDS into a “true auction market” in selling bonds to raise participation from traders and regulators across the table.