PSE-PDS merger stalled indefinitely

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THE planned merger of the stock and bond markets remains stalled as the Philippine Stock Exchange (PSE) is reviewing its bid to acquire the Philippine Dealing Systems Holdings Corp. (PDS), a top exchange official said on Tuesday.

PSE president Hans Sicat said on the sidelines of the Latham & Watkins Philippines Conference 2016 on Tuesday that the exchange is still “reviewing things internally” before re-submitting its bid to the Securities and Exchange Commission (SEC) to own more than 20 percent of fixed-income trading platform operator PDS.

Under corporate rules, a single entity may only own up to 20 percent ownership of an exchange, which was why the PSE’s initial bid to be given “exemptive relief” from this rule was not approved by the SEC last year. Currently, the PSE holds a 20 percent stake in PDS.

“Actually, right now, we’re also reviewing things internally, including the review of what’s happening to PDS as a
firm… When you think of the whole deal, the SEC is actually one of the counterparts that we need to deal with, but there are also other counterparts–the owners of PDS we need to deal with,” Sicat said.


Last August, Sicat said the exchange was planning to refile a bid for exemptive relief on the 20 percent ownership cap within this year.

But asked during Tuesday’s event, the PSE president said “it might take a little longer” with the internal review at present.

“It’s not as if we just went off to lunch and came back after lunch; it’s something more than that. It might take a little bit longer,” he added.

SEC Chairperson Teresita Herbosa said at the same event that the commission is waiting for the PSE to re-file a new application.

“We said we’re just concerned with one aspect. At least the major consideration would be whether the combination or consolidation of PSE and PDS will result in less cost for investors,” Herbosa said.

“The issue on competition is now the concern of the PCC [Philippine Competition Commission]. Because when they [PSE] first applied, the PCC wasn’t there yet so we had to tackle that too. But as far as I’m concerned, [it’s a question of] whether the PSE and PDS [merger]will be able to reduce the costs for the investors,” Herbosa said.

When the PSE first applied for PDS acquisition last year, the exchange was keen to acquire the shareholdings of all the other stakeholders of PDS. The PSE eventually secured selling agreements with the Bankers Association of the Philippines (BAP), which holds a 28.9 percent stake in PDS, and various minority shareholders which own a collective 31.1 percent of PDS.

But it failed to secure a deal with the Singapore Exchange Limited (SGX), which holds 20 percent share in PDS.

Earlier this year, the SEC rejected the PSE’s application to fully acquire PDS, citing that “the PSE has not determined synergies and efficiencies that will indeed translate to meaningful benefits to the investing public and issuers. Without sufficient basis, the commission cannot grant PSE exemption.”

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