PLDT to control 30% of Meralco

PLDT will acquire a 30 percent stake in Meralco to frustrate a perceived takeover attempt by San Miguel Corporation.

The Pilipino Telephone Corporation or Piltel, one of the wireless phone units of Philippine Long Distance Telephone, will purchase 20 percent of Meralco’s outstanding common stocks from the Lopez family for about $414 million. The Lopezes will retain only 13.4 percent of the power firm.

Under the agreement, PLDT or an assignee will purchase from First Philippine Holdings Corporation a total of 223 million shares of Meralco, representing about 20 percent of the total issued and outstanding common stock at a price of $1.85 per share, or a total of $414,712,263.66.

Other than Piltel, PLDT affiliate Metro Pacific Investments Corp. (MPIC) is also eyeing another 10.17 percent Meralco stake acquired recently by a pension fund owned by PLDT employees.

Meralco is the largest distributor of electricity in the Philippines. Its service area covers 9,337 square kilometers, where approximately a quarter of the total country’s population resides. It also operates a fiber optic network of more than 1,000 kilometers and provides leased-line connections, data networking solutions and disaster recovery transport services.

FPHC and PLDT agreed on certain corporate governance principles, such as nomination of directors to the Meralco Board. First Holdings will use the proceeds from the transaction for investments, debt payments and other general corporate purposes.

First Philippine Holdings, the holding company of the Lopez family’s power generation interests, said it would vote with PLDT at the 26 May annual meeting of Meralco stockholders. It did not say whether the Lopezes would relinquish management control of Meralco to PLDT, which now has the much bigger stake.

The purchase comes just two months before Meralco's stockholders meeting in May, when a battle for control between San Miguel and PLDT is likely to ensue.

San Miguel bought a 27 percent stake in Meralco from state-run pension fund Government Service Insurance System (GSIS) last October, acquiring key boardroom and management representation. It has also marshaled some allies to establish control of 38 percent of Meralco.

The Lopez group plans to eliminate $500 million in outstanding debts.

Industry sources said the Lopez family had been in talks with the group of PLDT Chair Manuel V. Pangilinan for a potential deal in Meralco since October last year, even before San Miguel bagged the 27 percent stake held by the state-owned GSIS. The Lopezes were then under fire from GSIS president Winston Garcia, who accused the family of mismanaging Meralco and of forging power supply contracts favorable to their power generation businesses.

The deal forged last week would allow Pangilinan’s group—via Pilipino Telephone Corp. and eventually Metro Pacific Investments Corporation—to control 30.2 percent of Meralco, thus becoming the single biggest voting bloc in the power retailer. Metro Pacific is 97.3 percent owned by Hong Kong-listed First Pacific, which is also the single largest shareholder in PLDT with 26.4 percent of the voting capital.

First Pacific, which has a 97.3 percent interest in MPIC, said "there is significant potential for the uplift in the value of Meralco as its business develops along with the growth of the Philippine economy."