Why only P2.20 per LIB share?

3
Emeterio Sd. Perez

Emeterio Sd. Perez

On July 10, I wrote about three tenders by Vega Telecom Inc. in buying out the public of their common shares in Liberty Telecommunications Holdings Inc. My intention in reporting them was to give the public an idea about the offer price, which Globe Telecom Inc. and Philippine Long Distance Telephone Co. (PLDT) should have disclosed immediately after acquiring Vega Telecom from San Miguel Corp., but they did not.

Vega Telecom, the majority stockholder of Liberty Telecoms, is a wholly owned unit of San Miguel.
Such non-disclosure of what can be classified as material fact even escaped scrutiny by the Securities and Exchange Commission.

Why did PLDT and Globe Telecom omit the tender price following their acquisition of Vega Telecom from San Miguel Corp. (SMC)?

In its June 1 posting on the Philippine Stock Exchange website SMC said: “The consideration is P52,080,764,982 inclusive of outstanding advances and the assumption of liabilities of Vega and its subsidiaries amounting to P17,021,535,948.”


These numbers were encouraging to the public because they would cleanse Liberty Telecom of the financial burden. They should have been a big influencing factor in determining the offer price for LTHI shares.

Previous tenders
To give the public an idea of possible tender price per LIB share, Duediligencer searched among Liberty Telecoms’ filings, still posted on the PSE website, and found the following tenders/buybacks:

On July 8, 2009, Vega Telecom bought from existing stockholders 579,111,669 Liberty Telecoms shares from for P2,041,451,161, or P3.525 per share.

On Oct. 5, 2010, Vega Telecom spent P221,482,398 in buying back 64.589 million shares, or P3.429 per share.

On July 21, 2015, Vega Telecom made a tender for the acquisition of 57,271,369 shares from the public and 426,800,168 from existing stockholders for a total of 484,071,537. It paid P1,064,957,381 or P2.20 per share for the acquisition.

Will the SEC ask Vega Telecom why its offer price per share has been dropping, finally dipping to P2.20 in July 2015, which PLDT and Globe Telecom adopted in their-pre-delisting tender price?

P2.20 per share
It seems SMC and Vega Telecom have been conditioning the public that Liberty Telecom is a financial burden with the SEC seemingly unconcerned about everything.

The SEC officials remain silent. It may not be too late for them to review the analysis undertaken by Punongbayan & Araullo to see if P2.20 per LTHI share is fair. The mere fact that PLDT and Globe even assumed the liabilities of Liberty Telecom was a big factor that should have been taken by P&A in determining the tender price for LTHI shares owned by the public.

Remember too that Liberty Telecom has already undergone rehabilitation at the expense of stockholders. This time, are the public being (to borrow a word from a message I received from a reader of The Manila Times) “screwed” again?

Despite such low price, it seems the public have no option but to accept it because Liberty Telecom would soon vanish from the market. In short, it will be delisted from the board of the Philippine Stock Exchange. Having been delisted, Liberty Telecom would become a hidden but precious asset of PLDT and Globe Telecom.

Telecom assets
By the way, PLDT and Globe Telecom, which were formerly competitors, have suddenly become allies for the sake of profitability. After all, they share 50-50 in SMC’s telecom assets which they can put to good use in reversing Liberty Telecom’s strings of losses.

A reader of The Manila Times described SMC’s telecom assets as LIB’s prized possession”, referring to the 700 Mhz frequency, “that has apparently been transferred . . . to a sister company, BellTel,” The emphasis is on the word “transferred” which means “given free” because Liberty Telecom “did not get even a single centavo in return.”

Again, this is something that is not only for the SEC must look into. Such transfer of assets without any kind of payment must also be reviewed by the Bureau of Internal Revenue to see if it has been ignored in the realignment of corporate assets. Has there been payment, either in cash or stock, BIR examiners should know if the deal was taxable.

Incidentally, did PLDT and Globe Telecom set their tender price at P2.20 per LIB share so that they would be entitled to more shares when the liabilities that they assumed are converted to equity? In other words, the lower the offer price, the better for the creditors.

esdperez@gmail.com

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3 Comments

  1. The provision of “appraisal rights” of minority shareholders under the Philippine Corporation Code was clearly violated due to the non-disclosure of the transfer of its biggest assets…the 700MHZ frequencies. Such transfer would have required a special stockholders meeting so that dissenting shareholders can have the opportunity to get a fair compensation through the “appraisal rights” regulation under the Philippine Corporation Code. I hope the Manila Times investigative reporters steps into this appraisal rights issue. Non-disclosure was clearly evident if you check the PSE EDGE system on March 2015.

    THE
    CORPORATION CODE
    OF THE
    PHILIPPINES
    [Batas Pambansa Blg. 68]

    TITLE X
    APPRAISAL RIGHT
    Sec. 81. Instances of appraisal right.- Any stockholder of a corporation shall have the right to dissent and demand payment of the fair value of his shares in the following instances:
    1. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence;
    2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as provided in the Code; and
    3. In case of merger or consolidation. (n)
    Sec. 82. How right is exercised. – The appraisal right may be exercised by any stockholder who shall have voted against the proposed corporate action, by making a written demand on the corporation within thirty (30) days after the date on which the vote was taken for payment of the fair value of his shares: Provided, That failure to make the demand within such period shall be deemed a waiver of the appraisal right. If the proposed corporate action is implemented or affected, the corporation shall pay to such stockholder, upon surrender of the certificate or certificates of stock representing his shares, the fair value thereof as of the day prior to the date on which the vote was taken, excluding any appreciation or depreciation in anticipation of such corporate action.
    If within a period of sixty (60) days from the date the corporate action was approved by the stockholders, the withdrawing stockholder and the corporation cannot agree on the fair value of the shares, it shall be determined and appraised by three (3) disinterested persons, one of whom shall be named by the stockholder, another by the corporation, and the third by the two thus chosen. The findings of the majority of the appraisers shall be final, and their award shall be paid by the corporation within thirty (30) days after such award is made: Provided, That no payment shall be made to any dissenting stockholder unless the corporation has unrestricted retained earnings in its books to cover such payment: and Provided, further, That upon payment by the corporation of the agreed or awarded price, the stockholder shall forthwith transfer his shares to the corporation. (n)

  2. it seems the public investors were taken for a ride. and the pse and sec did not do enough to protect the interests of the minority stockholders. can you imagine a transaction of this magnitude and nature (transfer of LIB shares to a sister company (for free?) being kept out of public knowledge for over a year? in any case, i think the tender price at 2.20 is anything but fair and reasonable. why should it be lower than market price?
    btw, your last paragraph raises a very relevant issue. a very good question!