Dennis Uy's Udenna to challenge PCC decision or file notification

MANILA, Philippines – Udenna Corporation, holding firm of tycoon Dennis Uy, is studying whether it will challenge the Philippine Competition Commission (PCC) decision to void its purchase of 2GO indirect shareholder KGL Investment BV (KGLI) or not.

"Udenna is of the view that it has sufficient basis to challenge the PCC decision either by filing a motion for reconsideration with the PCC, or through a petition to the Court of Appeals (CA)," Adel Tamano, vice president for corporate affairs at Udenna, said in a statement on Monday, February 19.

"Udenna also has the option to submit to the PCC decision and file a notification to the PCC," he added. (READ: How the Sy family and Dennis Uy became business partners)

Tamano said Udenna is weighing its options and will choose what it deems will be best for the group and its shareholders.

Udenna said it only learned about the PCC decision through the website of the anti-trust body and through email.

The PCC declared void Udenna's acquisition of KGLI for non-notification of the transaction.

Aside from voiding the transaction, the PCC also imposed a fine of P19.6 million, equivalent to 1% of the value of their transaction, which both firms failed to run by the government agency as required by law. (READ: How SM Investments acquired stake in 2GO)

The Udenna-KGLI merger, worth $120 million (P6.29 billion), is the 1st deal to be voided by the country's anti-trust body for non-notification.

Tamano noted that the transaction was executed a month after the implementing rules and regulations (IRR) of the Philippine Competition Act (PCA) took effect, which is the basis for the PCC decision.

"Udenna acted in good faith in consummating the transaction based on its interpretation of the newly-issued rules of the PCC, which in Udenna's opinion are ambiguous. At the time of completion of the subject transaction, the PCC rules were new, and Udenna had no guidelines, interpretative rulings, or precedents to rely on," Tamano added.

'Unduly harsh'

Back in June 2016, the PCC released more detailed IRR for the PCA, adding joint ventures under its turf and relaxing rules on reporting for mergers and acquisitions.

It was in August 2016 when Udenna bought all of KGLI Investment Cooperatief UA's shares in KGL Investment BV, which in turn owned 39.71% of KGLI-NM Holdings Incorporated.

KGLI-NM Holdings is a Filipino firm that owns about 60% of 2GO parent firm Negros Navigation Company Incorporated. (READ: How SM Investments acquired stake in 2GO)

"Udenna believes that the decision to declare the transaction void and at the same time impose a penalty of P19.7 million was unduly harsh and uncalled for," Tamano said.

PCC Chairman Arsenio Balisacan, Commissioner Johannes Bernabe, and Commissioner Amabelle Asuncion signed the decision. 

PCC Commissioner Stella Quimbo, however, concurred with the imposition of the administrative fine but not with the void penalty. 

"[I]mposing the void penalty is arguably a surplusage. There is no continuing direct harm to the market by the subject transaction that the void penalty needs to prevent," Quimbo said in a separate opinion.

Tamano said Udenna is confident that its acquisition of the shipping holding company remains assured considering that it has paid the agreed consideration and its counter-party is still committed to the transaction.

Udenna is comprised of firms engaged in petroleum and oil (Phoenix Petroleum), shipping and logistics (Chelsea Logistics and 2GO), real estate and property development (UDevCo), education (Enderun Colleges), and convenience stores (Family Mart).

Phoenix Petroleum and Chelsea Logistics are publicly listed in the Philippine Stock Exchange. – Rappler.com