DEALTALK-Manila Electric sizzles, shareholder tussle not over

By Rosemarie Francisco MANILA, Nov 16 (Reuters) - Manuel Pangilinan, one of the Philippines' most powerful corporate figures, looks to have gained the upper hand in the fight to own Manila Electric Co , ensuring the utility's shares will keep rising as the takeover tussle continues. The closely followed battle for control over Manila Electric or Meralco, the Philippines' largest power retailer holding an extensive fibre optic network, pits Pangilinan, chairman of PLDT , against Ramon Ang, president of San Miguel Corp . Pangilinan, the chairman of Metro Pacific Investments Corp , recently bought half the 13.4 percent Meralco stake held by First Philippine Holdings Corp. With the $471 million buy, Pangilinan upped his shares in the company and allowed his allies, the Lopez business clan who own First Holdings, to keep a hand in the business they have been running for decades. Pangilinan is not ready to stop buying and neither is Ang's group.

Analysts say the takeover fight will spill over to the open market and persist until a shareholder group ends up with at least 50.1 percent of Meralco. "The freefloat is less than 10 percent, I'm sure both of them are looking for whoever is holding those shares," said an analyst from a foreign equities house who asked for anonymity for lack of authority to speak to the media. "One thing is for sure, until somebody gets to 51 percent, Meralco's share price will be high, because it will be accumulated," the analyst said. Meralco shares, down nearly 3 percent on Monday to underperform the broader market's 0.76 percent decline, have risen nearly 240 percent so far this year and is up 7.5 percent this month. MATCHING BID The latest deal by Pangilinan's Metro Pacific was designed to match a rival proposal submitted days earlier by Henry Sy Jr., son and namesake of the country's richest man and business partner of San Miguel's Ang, who offered to buy the Lopez's entire 13.4 percent Meralco stake at 300 pesos ($6.4) per share. The terms of Metro Pacific's transaction with First Holdings ensures it will end up owning the Lopez family' remaining stake if and when they decide to sell out anytime in the next three years. But even if Pangilinan buys all of the Lopez clan's stake, his group would end up with only 48 percent of the utility. Sy Jr.'s surprise entry had led to frantic trading in the utility, sending it to a two-week high early this month. Both Sy Jr. and Ang are considered hostile buyers in the utility, with the latter aiming to use Meralco's fibre optic backbone to support San Miguel's entry into telecommunications, a venture that will compete head to head with PLDT. The group of Sy Jr. gave the Lopez clan a cheque covering a portion of his $940 million bid, with the rest of the payment to be delivered at a later date. The Lopez group declined the cheque and the offer. For his successful bid, Pangilinan's Metro Pacific offered some money via a 11.2 billion pesos loan to First Holdings with 5 percent interest per annum maturing on the same day the entire deal is completed on March 31, 2010. U.S. merger advisory firm Evercore Partners Inc was First Holdings' adviser to the deal, its first in Asia. The deal required a cash component because the Lopez clan needs 10 billion pesos to invest in a solar power project and subscribe to a rights issue at its geothermal arm before the year ends. It also wants to repay in advance some dollar loans. "PLDT's was a defensive move because the (Lopez) shares already vote for them, now they have to pay for them," said an industry source familiar with the deal. The sale price, at 300 pesos per share, offered a 36 percent market premium, but it was reasonable to both parties because their initial purchases were at 90 pesos apiece. This meant their average acquisition cost in Meralco was still below current market price. "For a new buyer, anything above 200 pesos is stupid," the industry source said. "From the very beginning, it was obvious, only two groups will buy this (Lopez stake)." ($1 = 46.95 pesos) (Reporting by Rosemarie Francisco; Editing by Valerie Lee) (([e-mail]; [phone]; Reuters Messaging: [e-mail])) Keywords: DEALTALK/MERALCO (If you have a query or comment on this story, send an email to [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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