George Ty and MVP transaction is best deal of 2016 – IHAP
MANILA, Philippines – The deal that brought together two of the country's biggest conglomerates – the family business of tycoon George Ty and the group of businessman Manuel V. Pangilinan – was considered the most innovative and complex.
The P51-billion agreement between the two groups won the Best Deal of the Year (2016) award from the Investment House Association of the Philippines (IHAP). First Metro Investment Corporation (FMIC) was recognized for putting the deal together.
"It's a very exciting, very challenging transaction. The size itself, and the parts, the components… it's hard work," FMIC executive vice president Justino Ocampo told Rappler on the sidelines of the awarding ceremony on Wednesday, March 15.
George Ty's holding company, GT Capital Holdings, Incorporated, sold its 56% equity stake in its power unit, Global Business Power Corporation (GBP), to Beacon Electric Asset Holdings, an associate of Pangilinan-led Metro Pacific Investments Corporation (MPIC), for P22 billion.
Beacon Electric holds the power assets of MPIC, and is a joint venture between MPIC and its sister firm Philippine Long Distance Telephone Company (PLDT).
In exchange, GT Capital acquired a 15% strategic stake in MPIC for P29.8 billion. This made GT Capital the second largest stockholder of MPIC after First Pacific Ltd. The parent firm of MPIC retained a 55% share.
"The deal had many moving parts," said Ocampo. "Most deals are usually either buy or sell only."
FMIC was the financial advisor for both. The deal took almost two years to seal.
The two business groups are no stranger to each other. They have done business together before.
In 2015, the Ty family sold their 20% stake in Manila Doctors Hospital to MPIC for P368 million. The tycoon invested in Manila Doctors in 1979 and currently serves as honorary chairman.
Manila Doctors is among the 13 hospitals MPIC has acquired and operates as a network. MPIC is currently the biggest operator of private hospitals in the country.
Ty's financial units, Metrobank and FMIC, also have a close relationship with MPIC. These previously helped fund the latter's acquisition of Manila Electric Company (Meralco).
Meralco is the largest power distributor company in the Philippines. It serves Metro Manila, 36 cities, and 75 municipalities. Since it acquired a controlling stake in Meralco in 2009, MPIC has since increased its stake in the power giant to 32.48%.
"While we advised GT Capital, we have a strong relationship with Metro Pacific, primarily as its bankers. The Metrobank Group supported MPIC's key strategic acquisitions in the past," said Ocampo.
When the 2016 deal between the two groups was announced, it triggered coffee shop talk in Manila that the Ty family is positioning to get its foot in the door as transition concerns hound 70-year-old Pangilinan.
Pangilinan controls the Philippine businesses of First Pacific Ltd, the holding company of the Salim family of Indonesia. Aside from MPIC, First Pacific's assets in the Philippines include telephone giant PLDT and Philex Mining Corporation.
When asked if both groups discussed the matter while completing the deal, Ocampo replied: "I don't think so. I think it (MPIC) is a mature organization, it has its own structure. That's probably speculation."
Newly inducted IHAP president Conrad Gloria shared the sentiment. "I'd probably not venture into that thought. MPIC is largely a professional group so that if MVP (Pangilinan) [retires], there might be a vacuum but the different units are well-led at this point. I think it's more the Tys dipping their hands into infra[structure]."
The complex deal highlights the Tys' further expansion into the infrastructure business, and having a share of a bigger pie.
The power business of the Tys was among the recent additions to the GT Capital portfolio, which has traditionally been composed of its financial units (Metrobank and Philippine AXA Life Insurance), its automotive manufacturing and distribution of Toyota vehicles, and property unit Federal Land.
Global Power, which the Tys set up in 2002, was originally envisioned as a major source of future growth for the group. It is currently the biggest power producer in the Visayas region, with an aggregate capacity of 852 megawatts. Its major power assets include the facilities under Cebu Energy Development Corporation and Panay Energy Development Corporation.
To grow Global Power, however, the Tys could have done it alone. In entering the deal with the Pangilinan group, it meant they had decided instead to partner with a bigger group to pool both their infrastructure assets.
MPIC is considered an infrastructure conglomerate with revenues coming from different sources. Aside from power unit Meralco, MPIC also has stakes in water distributor Maynilad Water Holdings, Metro Pacific Tollways Development Corporation, Metro Pacific Light Rail Corporation, and Metro Pacific Hospital Holdings. The group's tollways unit operates the 90-km North Luzon Expressway (NLEX) and 94-km Subic-Clark-Tarlac Expressway (SCTEX).
"It made sense for both sides. The GBP (Global Power) acquisition provided the MPIC group an automatic [power] generation portfolio in Visayas," Ocampo said of the deal.
"For GT Capital, on the other hand, the acquisition readily provided a diversified infrastructure portfolio not just in power generation, but to a wider infrastructure play too," he added.
Aside from awarding the Best Deal of the Year, IHAP also recognized other transactions and players last March 15.
Below is the complete list of IHAP awardees:
Best Advisory Deal of the Year: GT Capital Holdings, Incorporated (First Metro Investment Corporation)
Best Advisory House of the Year: First Metro Investment Corporation
Best Equity Deal of the Year: Cemex Holdings Philippines, Incorporated (BDO Capital and Investment Corporation)
Best Equity House of the Year: BDO Capital and Investment Corporation
Best Fixed Income Deal of the Year: SMC Global Power Holdings Corporation (BDO Capital and Investment Corporation/RCBC Capital Corporation)
Best Fixed Income House of the Year: BDO Capital and Investment Corporation
Best Project Finance Deal of the Year: GNPower Dinginin Ltd Company (BDO Capital and Investment Corporation/RCBC Capital Corporation)
Best Project Finance House of the Year: BDO Capital and Investment Corporation
Best Deal of the Year: GT Capital Holdings, Incorporated
Best Investment House of the Year: BDO Capital and Investment Corporation
Audit and advisory firm KPMG R.G. Manabat & Co. provided the criteria, mechanics and tabulation for the judging of the IHAP Award.
IHAP also introduced its new set of officials and directors. Investment & Capital Corporation of the Philippines president and COO Conrad Gloria took over the reigns from Manny Tordesillas of Maybank ATR Kim Eng Capital Parters, Inc, who was IHAP president for 6 years.
IHAP, a non-profit organization of local investment houses, aims to promote a better understanding of how these financial bodies can contribute to the growth of Philippine businesses and the economy through the capital market. – Rappler.com