There is still a massive need for infrastructure investments in the country and this will provide opportunities for shareholders to participate directly in infrastructure development
If there’s one thing this business conglomerate has done for Filipinos, it’s to make daily routines more convenient and hassle-free.
From the time we wake up to the time we go to bed after a long day, we constantly reach for our smartphones for communication, switch on power to use gadgets and appliances, access clean water and commute or drive on paved roads.
We’re talking about Metro Pacific Investments Corp., which reported net income of ₱9.9 billion for the first half of 2023, up 33 percent from ₱7.5 billion a year earlier.
It attributed improved financial and operating results to the strong performance of its power generation business and higher water tariff for the water concession.
MPIC believes, however, that the intrinsic value of its core investments in infrastructure in the country has not been fully reflected in its share price for some time.
Hence, it has proposed voluntary delisting to allow its minority shareholders to realize a significant premium over the historical share prices of the firm.
Yesterday, (August 22), First Metro Securities as the Tender Offer Agent for the privatization of MPI hosted a webinar to explain the tender process logistics to minority shareholders looking to sell their shares into the bid consortium’s delisting tender offer.
Tender offer for MPI shares officially began on August 9 after shareholder vote for the process launch was easily passed at the Special Shareholders Meeting (MPIC SSM) on August 8.
The tender offer period will end on September 7.
The delisting resolution at the MPIC SSM easily passed by a wide margin of over 77 percent voting in favor and less than 1 percent voting against, highlighting the positive reaction of minorities to the increase in bidders’ tender offer price P5.20 announced on July 3, which represented a significant increase from their initial tender price of P4.63 in April.
An insider indicated that many brokers were confident the SSM vote would be passed given strong favorable reactions from their clients after the revised bid, and did not bother submitting a proxy, but rather, would just wait for the tender to open.
The offer price of P5.20 was above the valuation range set by an independent third party, which valued MPI’s share price at Php3.37 to P5.10 per share.
Furthermore, the offer price represented a significant premium of 39 percent to MPI’s historical 3-year volume weighted average trading price of P3.75 per share.
The tender offer includes a delisting condition whereby 95 percent of outstanding common shares need to be achieved by the consortium in the tender offer, or a lower threshold as permitted by the Philippines Stock Exchange, in order for the transaction to be completed.
The delisting will ensure that the privatization plan would be achieved and avoid an undesired outcome similar to the recent Holcim (HLCM.PSE) situation, which led to an involuntary trading suspension by falling below the PSE’s minimum public float requirement of 10 percent. This would result in shareholders wishing to sell their shares of an unlisted company to be subject to unfavorable capital gains and documentary stamp taxes.
Public minorities eager to sell and receive an attractive cash pay-out from the tender offer are now concerned about a scuttled deal if major shareholders such as GFIs GSIS and SSS (who together hold approximately 6 percent of MPI’s total common shares) do not accept the bidders’ offer.
In addition, GSIS and SSS as government financial institutions will not be subject to the same tax consequences that other public minorities who remain in an unlisted MPI will face.
This means a large number of minority shareholders wanting to accept the tender offer price may lose their chance for a large pay-out if the bidders are unable to complete the transaction and subsequently withdraw if the voluntary delisting is not achieved.
Should this scenario happen, MPI shareholders would need to remain in a listed company and run the risk of the share price falling to levels traded prior to the initial bid in April. The existing bidders would be barred from holding another tender for a long time according to the rules, and whether there would be any desire left to do so would be another issue.
With strong support from public shareholders to see a successful transaction and monetize their investment at a high price, the best course is for the GFIs to accept the bidders’ tender offer and pave the way for minorities to sell out.
It would be unfortunate, MPI said, if all the minorities lose out on the chance to realize an attractive return opportunity for their investment.
Bidders have expressed their commitment to further support Philippine infrastructure and thus, the nature of the business of MPIC will continue.
In fact, there is still a massive need for infrastructure investments in the country and this will provide opportunities for shareholders to participate directly in infrastructure development.
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