Why GMA-Ramon Ang talks collapsed

MANILA, Philippines – This was the fifth time that broadcast giant GMA Network, Incorporated terminated acquisition talks with a possible investor; and analysts said it could be because of a higher offer or a price no one can afford.

GMA Vice President Ayahi Ari Augusto Chio informed the Philippine Stock Exchange Tuesday, June 23, that talks have collapsed between Ramon S. Ang and the majority shareholders of GMA for the planned acquisition of a minority stake in the listed broadcast network. (READ: GMA-Ramon Ang talks collapse)

This came as a surprise to Ang, who responded via text message: “I was surprised. I did not expect this. There was no indication they would do this in the middle of negotiations. I am consulting my lawyer and I am waiting for an explanation.”

Ang is the president and chief operating officer of San Miguel Corporation – a conglomerate that has ventured from food and beverage into other industries like telecommunications, energy, petroleum, and commercial aviation.

GMA shares went down Tuesday by 0.63% to end P6.29 ($0.14) apiece from Monday’s P6.33 ($0.14) 

Several stock analysts who are monitoring the Gozon-led network did not expect the announcement as well. “It’s shocking. Our speculation is that GMA might have received a better offer from a new investor,” Astro del Castillo, stock analyst and managing director at brokerage First Grade Finance, Incorporated, said in a phone interview Tuesday.

He added, “the network has a good potential, knowing its wide reach and scope. I haven’t seen the agreement between Ramon Ang and GMA, but there could be no exclusivity so they can terminate the deal anytime.”

For Luis Limlingan, business development head at Regina Capital Corporation: “It’s a bit of a surprise.”

“I guess the GMA executives didn’t want the talks to drag down more,” he told Rappler in a phone interview.

GMA wants more?

In January 2014, a news report claimed Ang had offered to buy at least 30% of GMA from majority stockholders at a premium of P10.80 ($0.24) per share. Some stock analysts speculated that the broadcast network might want more than what Ang had offered.

Limlingan said one possible scenario is that GMA might think it is undervalued by Ang’s offer.

“Perhaps GMA was not in a hurry to sell their stake, feeling they could get a better price. Second, they might want a partner whose strategic vision was more aligned to theirs. Maybe they wanted an international business network to come in,” Limlingan said. (READ: Is Ramon Ang buying GMA? Network chief now uncertain)

Raul Ruiz, vice-president and research head of RCBC Securities, shared the same assumption.

“I guess it has to do with the pricing. They could be talking to other investors or GMA just wants the business to itself. They could be pricing it to a price it cannot be sold. It first happened with MVP (Manuel V. Pangilinan); the talks were also terminated because of the pricing,” Ruiz told Rappler in a phone interview.

Failed talks

This was not the first time that GMA terminated an acquisition deal with a possible investor.

In February 2014, a similar deal between GMA and Manny V. Pangilinan’s Philippine Long Distance Telephone Company (PLDT) bogged down because of a pricing issue. PLDT completely owns TV5 and has indirect, majority stakes in BusinessWorld and The Philippine Star, as well as a minority stake in the Philippine Daily Inquirer.

In March last year, PLDT and GMA tried to revive their talks for a 34% stake in the network, but this failed anew as price and regulatory issues got in the way.

PLDT and GMA were in acquisition talks several times in 2001, 2004, and 2012.

Juan Rafael Supangco, head of research at Angping & Associates Securities, Incorporated said they have seen these scenarios on the deal time and time again.

“Though Mr. Gozon has already announced the termination, I believe we haven’t seen the end of the negotiations yet. Perhaps for the time being. RSA (Ramon S. Ang) is known for giving good premium on acquisitions or bids but within reasonable levels. Perhaps price being asked for is too steep,” Supangco said.

“It could be because the talks were proceeding quite slowly and GMA might want this to serve as a wake-up call for Ramon Ang. Maybe after a few months, the talks may resume. We, along with the market, are speculating at this point,” Regina Capital’s Limlingan said.

Ang’s options

Asked what could be Ang’s next move, Ruiz said the businessman can either increase his offer, look into other media acquisition deals, or revive talks with Radio Philippines Network (RPN-9).

“He could give a better offer or look for another media acquisition or do both. RPN-9 is being sold. He could look into that,” Ruiz said.

In 2012, Ang said he is keen on acquiring a personal stake as a major shareholder of (RPN-9), a media firm that is partly owned by the government.

“RPN-9 revival of talks might also be a possibility despite Cabangon-Chua’s stake,” Supangco said in a text message.

In August 2014, business interests identified with Antonio Cabangon-Chua bought the entire stake of the Tieng family in Solar TV Network, Incorporated (STVN), a deal that gave his group a 34% interest in RPN-9. Cabangon-Chua has interests in print and radio, including the daily business newspaper Business Mirror, tabloid Pilipino Mirror, and Aliw Broadcasting Corporation.

Supangco added that another possibility is that Ang will “probably not make a higher offer and just wait a little more.” He said: “There aren’t many companies out there on the block that has the same reach and scale as GMA.”

‘No impact’

The termination of the GMA-Ang acquisition deal, however, will have no impact on the operations of GMA, according to some analysts.

“For the market, I think it’s a non-event issue. It’s a transaction between Ramon Ang on a personal level and the majority stockholders of GMA. If Ang is buying it for San Miguel, then there could be an impact on the market,” Ruiz said.

San Miguel itself had clarified in a May 6, 2014 disclosure that the talks involved “a personal investment of Ang.”

First Grade’s Del Castillo said: “Because of this instance, GMA will be able to get maximum value. They won’t terminate the deal without due reason, that’s for sure.”

Harry Liu, president of brokerage firm Summit Securities, Incorporated, said in a phone interview that as far as he knew, there is no drastic change on the share price. “It could be because it’s more of a personal transaction between the GMA executives and Ramon Ang. No direct impact on GMA nor San Miguel Corporation,” Liu said. – Rappler.com

$1=P45.10