Eton's new majority owner avoiding buying out minority

The unlisted firm that now owns majority of Eton Properties Philippines, Inc., wants regulators to reconsider an order requiring it to buy out minority shareholders in the Lucio C. Tan-led property developer. In a six-page letter to the Securities and Exchange Commission (SEC), Paramount Land Equities, Inc. — another Lucio Tan firm — claimed relevant documents that might have been overlooked would prove that it was exempted from the tender offer rule. Last year, Eton Properties swapped 1.6 billion shares worth P2.50 apiece for a 12-hectare property owned by Paramount Land in Quezon City. Following the swap, Paramount Land became Eton Properties' majority shareholder The stake of Saturn Holdings, Inc. was diluted to 44 percent. Both Paramount Land and Saturn Holdings are private firms under the Lucio Tan group of companies. The SEC thereafter required Paramount Land to also buy the shares of minority stockholders at P2.50 per share under the tender offer rule. The price represented a 27-centavo premium over Eton Properties' three-month weighted average trading price of P2.23 per share in August to October last year. The tender offer rule says that a company that buys at least 35 percent of another company within a year must offer to buy the shares held by minority stockholders at the same price. The rule aims to protect minority shareholders from the possible dilution of their shares by giving them a chance to get out of the company. But Paramount Land argues that along with Saturn Holdings, it is "beneficially owned" by the Lucio Tan group, which means that the stake of minority shareholders had not been diluted when it bought a portion of Saturn Holdings' 94.34-percent stake last year. "The property-for-share swap will not result in a dilution of shareholder value and will not result in a change of management and control in Eton Properties. Thus, there will be no violation of the spirit, intent and purpose of the law," Paramount Land said. It further noted that it should be exempted from the rule since it bought the stake in good faith. Paramount Land noted that Eton Properties had bought a prime piece of property without using cash, in effect preserving its resources and benefiting its stockholders. The regulator said Paramount Land's case was under review and they were still awaiting certain documents. Shares of Eton Properties slipped by 3.22 percent or 8 centavos to P2.40 apiece yesterday, tracking the overall decline of the local equities. — Kristine Jane R. Liu, BusinessWorld