GSIS sells Meralco stake, drops tender offer demand

The Government Service Insurance System (GSIS) has sold its 4 percent stake in Manila Electric Co. (Meralco), abandoning a demand that it be given the same premium paid by the Pangilinan group when the latter tightened its hold on the country's largest power utility. GSIS President Winston F. Garcia told BusinessWorld the state pension fund had dropped its bid to have the tender offer rule imposed on businessman Manuel V. Pangilinan, whose firms last year effectively raised their stake in Meralco to 41.4 percent. "We already withdrew our complaints because we have no [further] interest in the matter, Garcia claimed. "[A former unit of] Philippine American Life and General Insurance Co. (Philamlife) bought our Meralco stake last month." Monico V. Jacob, president of pre-need firm PhilPlans, Inc., confirmed that his company was the one which bought the GSIS's Meralco stake, describing the acquisition as a good investment. "It is part of the investment program of the [pre-need firm]. We got a good deal," he said. Messrs. Garcia and Jacob did not disclose how much was involved in the sale, describing the agreement as confidential but hinting the price was "well above market..." Meralco shares closed at P197 on Friday. This compares to the price of P300 per share Pangilinan gave to the Lopez family in November for half of their remaining stake in the utility. At that time Meralco was trading at P221 apiece. Jacob said PhilPlans did not purchase the Meralco shares hoping to be bought out by Pangilinan should the Securities and Exchange Commission (SEC) decide that a tender offer must be staged. He clarified, nonetheless, that PhilPlans was open to selling the stake. PhilPlans was formerly Philam Plans, Inc. which was one of the major assets that American International Group, Inc.'s Philamlife sold last year. Philam Plans was acquired by Philippines First Insurance Company, Inc. of the Eusebio H. Tanco group and computer school Systems Technology Institute, Inc., where Jacob also sits as president. The GSIS last year asked the SEC to delist Pangilinan-led Metro Pacific Investments Corp. for allegedly skirting the rules in raising its Meralco stake. Complaints were also filed in court against several executives. The pension fund claimed the deal with the Lopezes triggered the tender offer rule, which states that any entity acquiring 35 percent of a listed firm within a year should extend the offer to the rest of the shareholders. The Pangilinan group currently has 34.7 percent stake in Meralco held by Metro Pacific (14.7 percent) and Pilipino Telephone Corp. or Piltel (20 percent). It will raise this to 41.4 percent once it exercises a call option with Lopez-led First Philippine Holdings Corp. The option has to be exercised by March 31 this year, a date beyond the one year mandated by the tender offer rule. The P22-billion deal involves half, or 6.7 percent, of the Lopezes' remaining 13.4 percent stake in Meralco, and includes a P12-billion loan to the Lopezes. The SEC said its investigation was not over. "We will continue to watch developments since there are still [other] Meralco minority shareholders [who are affected]. The investigation still continues," Corporate Finance Department director Justina F. Callangan said. In 2008, the GSIS' Garcia led a public fight to oust the Lopezes from Meralco but later in the year sold the pension fund's 27 percent stake in the utility to San Miguel Corp. The Lopezes then sold a 20 percent to Piltel last March amid rumors that the Eduardo "Danding" M. Cojuangco, Jr.-led San Miguel was planning a takeover. This sparked talk of a battle for control with the Pangilinan group and a record run-up in Meralco share prices. Pangilinan is chairman of Philippine Long Distance Telephone Co. (PLDT). Mediaquest Holdings, Inc., a unit of the Beneficial Trust Fund of PLDT, has a minority stake in BusinessWorld. — Kristine Jane R. Liu, BusinessWorld