PSE merger with PDS hangs by a thread

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THE Philippine Stock Exchange’s (PSE) efforts to acquire more shares in bond exchange operator Philippine Dealing Systems Holdings Corp. (PDS) could go to waste if its bid to own more than 20 percent of PDS is not approved by the Securities and Exchange Commission (SEC), a top PSE official said.

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The PSE is still awaiting approval from the SEC before the transactions it had entered into previously with PDS stakeholders expire today, November 27.

The local bourse has been transacting with PDS shareholders for an additional stake in the fixed income trading operator since early this year, in line with efforts to merge equities and bond trading. It has a November 27 deadline to close the deal with the Bankers Association of the Philippines (BAP) which owns a 28.91 percent stake in PDS.

“Right now there’s just one item that’s left, one final condition that we’re waiting is one approval, and that is of the SEC. All is complete; everything. Without that go ahead, there is really no deal,” Hans B. Sicat, PSE president and chief executive officer, told reporters after the PSE Bell Awards on Wednesday night.

But the PSE is still hopeful of getting an approval even at the “last minute” of the 27th, as all efforts to sign four share purchase agreements (SPA) so far will go to waste, Sicat said.

“All the terms [of SPAs are complete]. Everything. All the documents have been prepared, but I can’t exchange shares for money without approval. That’s the only thing,” Sicat said.

Tod date, the bourse already has four SPAs in place with PDS shareholders: the acquisition of a 28.91 percent PDS stake from the BAP for P650.55 million; 3 percent from Finex Research and Development Foundation Inc. (FINEX) for P69.39 million; 8 percent from Whistler Technologies Services Inc. for P147.204 million; and 0.06 percent from Insular Investment Corp. (IIC) for P1.186 million.

The PSE has sought the SEC’s approval to grant them “exemptive relief” from corporate laws that mandate that no single entity can own more than 20 percent stake in an exchange. If their petition is approved, this would mean that the PSE can own up to 100 percent of PDS.

SEC Chairperson Teresita J. Herbosa has said earlier that there are still a lot of things to consider on the matter, including the new competition law.

“It’s actually the issue of competition. We have a new competition law. We’re mindful [of]the unification of two exchanges, and they’re practically companies that might result in some dominance by a single entity,” she said earlier.

“What I understood is that the exemptive relief they are asking from us will not really delay these steps they are doing at the moment,” she said, adding: “We’ve been meeting with them. There are certain items we’ve already agreed upon.”

Asked if there is any plan B, such as extending the deadline of the PDS transactions, Sicat said: “The issue is that’s probably easier if you’re talking bilateral, maybe PSE and BAP.

But it’s not just between PSE and BAP, [it is also about]all the stakeholders of PDS, [and]there are many other shareholders who are maybe not involved or have a different view.”

“It might seem simple but there is a lot of requirements. So for us, the deal date is very significant. So I really don’t know what would happen after [November 27],” the PSE president said.

At the same event, Sicat said the bourse is nearing its target for the year of P200 billion in capital raising activities.

“In our own view, we’re hoping to close the year close to our P200 billion fundraising target. We’re now at P180 billion. There are many fund raisings for the rest of the year: IPOs [initial public offerings], everything. We’re a little bit shy of just P20 billion,” Sicat said.

Two companies are set to conduct their own IPOs before the year ends, which include the reduced IPO of DM Wenceslao and Associates Inc. (P10.7 billion from P18.88 billion), as well as the P207 million IPO of property developer Italpinas Development Corp.

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