San Miguel boosts Meralco stake in deal with SSS

Rappler.com
San Miguel now owns nearly one-third of Meralco after buying the stake of SSS. The deal is being questioned by the Commission on Audit

MANILA, Philippines – Diversified conglomerate San Miguel Corp now owns nearly one-third of the country’s largest power retailer, Manila Electric Co (Meralco), after buying the stake held by the state-run private pension fund.

San Miguel, through power generation unit SMC Global Power Holdings Corp, bought 62.99 million common shares, equivalent to 5.6%, of Meralco from the Social Security System (SSS) for P90 per share or a total of P5.7 billion.

The shares, which were crossed at the Philippine Stock Exchange through a special block sale on Monday, June 11, brought San Miguel’s indirect stake in Meralco to P32.29%.

The share sale deal was signed by the parties in 2008, but SSS agreed to release the shares only after SMC Global Power has fully paid. The deal was priced within the range that Meralco was trading in from 2008 to 2009. Meralco shares are now worth P243 based on the company’s closing price on Wednesday, June 13.

Questionable deal?

The deal became a subject of controversy after the Commission on Audit (COA) questioned it.

The COA slammed SSS for selling its P5.7-billion Meralco shares to SMC Global Power, whose net assets then were worth only P60 million.

But the SSS defended the agreement, saying it named state-owned Development Bank of the Philippines (DBP) as secondary buyer of the shares. To further minimize its risk, it said the parties agreed on a forfeiture clause, wherein all payments made by and dividends credited to the buyer would be forfeited in favor of SSS if both SMC Global Power and DBP failed to pay for the transaction.

SMC Global Power was formerly known as Global 5000 Investment Inc, a company formed in 2008 by businessmen Roberto V. Ongpin, Iñigo Zobel and Jose Campos, the same people behind the current biggest shareholder of San Miguel, Top Frontier Holdings Inc.

The Meralco share sale is one of the “questionable” transactions the Senate committee on banks, financial institutions and currencies, headed by Sen Sergio Osmeña III, plans to look closely into.

Osmeña earlier alleged that the government lost around P2 billion in opportunity trading gains when government financial institutions, including SSS and DBP, sold Meralco shares to Global 5000 in 2008. In 2009, Meralco shares broke the P300 level in the market as the groups of San Miguel and Manuel V. Pangilinan-led Philippine Long Distance Telephone Co (PLDT) battled for control of the company.

Meanwhile, there is also an ongoing Senate inquiry into financial transactions between DBP and another Ongpin-led firm involving P660-million “behest” loans that were used to purchase shares in the country’s biggest copper-gold producer Philex Mining Corp. Ongpin took out the loans to buy Philex shares which he later sold for nearly double the original price to Pangilinan’s group.

Biggest Meralco shareholders

The San Miguel and PLDT groups are Meralco’s two biggest shareholders.

As of March 31, 2012, San Miguel, together with its subsidiaries, owns 33.2% of Meralco, while PLDT owns 48.02%.

The Lopez family, who originally controlled the power distributor, owns around 3.94%. The rest is held by other institutions and the public. – Rappler.com