Digitel minority owners complain PLDT paid Gokongweis more

Rappler.com
Four Digitel shareholders complain PLDT paid them P1.60 per share while the Gokongweis got P21.12

MANILA, Philippines – Minority shareholders of Digital Telecommunications Philippines, Inc. (Digitel) want the firm’s new owners to offer the same price as what the Gokongweis got.
 
Four Digitel shareholders, who claimed to own 48.45% of the formerly Gokongwei-controlled telecommunications firm, asked the Securities and Exchange Commission (SEC) in a 14-page complaint to order the board of Philippine Long Distance Telephone Company (PLDT) to buy their shares at P21.12 apiece and not P1.60.
 
Complainants Dioceldo Sy, Edmundo Sia, Gary Lim and Arsenio Tan said PLDT acted in bad faith by making a mandatory tender offer of less than the price offered to the JG Summit Group, the holding company of the Gokongweis.

PLDT acquired the 51.55% stake of the JG Summit Group in 2011 in a share swap transaction valued at about P69.2 billion. The minority shareholders asked the SEC to look closely into the valuation of their shares.

Tender offer

The mandatory tender offer rule is meant to protect minority shareholders of a listed firm when an outsider acquires 35% or more, in effect diluting the investment share of existing shareholders. It gives the minority shareholders the chance to exit the company under reasonable terms, giving them the opportunity to sell their shares at the same price as those of the majority shareholders.
 
The complainants cited the tender offer rule, which provides that minority shareholders of Digitel should have the same opportunity to sell at  P21.12 per share, the value reportedly offered to JG Summit group. The minority shareholders said PLDT offered to buy their shares at only  P1.60 per.

“If it were true that P1.6033 per share is the value of Digitel shares as declared in the tender offer to the minority stockholders, why did PLDT not offer this amount to the majority stockholders to the detriment of the PLDT stockholders?” they wrote in their complaint.
 
PLDT is in the process of implementing a tender offer to acquire the remaining 3.08 billion common shares representing 48.45% of the Digitel’s outstanding capital held by shareholders. At the same time, PLDT said third parties holding convertible bonds issued by Digitel would be allowed to convert their holdings into common shares. These shares can, in turn, be sold back to PLDT.
 
PLDT estimated that third parties hold bonds that could be converted into 2.23 million common shares in Digitel. PLDT said it would acquire these shares at P1.6033 apiece, the same price PLDT acquired its existing Digitel shares. Once completed, PLDT said Digitel would apply for a voluntary delisting. The company said shareholders may choose to be paid in PLDT shares, at a price of P2,500 each, or in cash. The tender offer was scheduled from Dec. 7, 2011, to Jan. 9, 2012.
 
Wrong arithmetic

In a statement on Wednesday, Jan. 4, 2011, PLDT explained that the tender offer price of P1.6033 per share to Digitel minority shareholders is the same price paid to JG Summit and other related parties.

“Essentially, the minority shareholders were treated fairly,” according to PLDT spokesman Ramon Isberto.

Isberto explained that the P69.2 billion payment to JG Summit included not only its 3.27 billion Digitel shares, which amounts to approximately P5.2 billion at P1.6033 per share. He said this also includes the zero-coupon convertible bonds issued by Digitel and its subsidiaries that are convertible into 18.6 billion shares as of June 30, 201, equivalent to around P29.8 billion, and the advances made by JG Summit to Digitel and its subsidiaries amounting to approximately P34.1 billion.

“Meanwhile, the minority shareholders holding 3,079,840,418  Digitel shares representing 48.45% stake in the company will be paid a total of approximately P4.9 billion, at P1.6033 per share,  in cash or in PLDT shares valued at P2,500 per share should all the concerned shareholders accept the tender offer”.
 
In a text message, PLDT chairman Manuel Pangilinan said the complainants may be legit Digitel shareholders but could have been misinformed about the details of the transaction.

“Their arithmetic is wrong. They did not account the fully diluted shares… Ang laki ng convertibles ng Digitel that’s why minorities own much, much less than 48% post conversion.”

The complainants insisted otherwise. They said that JG Summit and PLDT have either made untrue statements or have omitted material facts relative to the tender offer. – Rappler.com