The Philippine Competition Commission said Tuesday it approved the acquisition of a controlling stake in Manila Water Inc. by Trident Water Holdings Company Inc., the holding comjpany of Prime Metroline Holdings Inc. Prime Metroline is controlled by tycoon Enrique Razon Jr.
The transaction involves the acquisition of the 51-percent voting interest in Ayala Group’s Manila Water through Trident Water’s subscription of 820 million common shares of stock from the unissued authorized capital stock of Manila Water.
Manila Water’s subsidiary, Philwater Holdings Company, is set to grant proxy in favor of Trident Water over the preferred shares to allow Trident Water to achieve a 51-percent voting interest in Manila Water.
The PCC said it approved the transaction because it would not likely lead to a substantial lessening of competition in the market of the supply of raw water to the East Zone Concession Area.
It cited that Manila Water, as the sole water distributor in the East Zone geographic market, has a captive customer base and no downstream competitors based on a concession agreement with Manila Waterworks and Sewerage System.
As waterworks is a form of “natural monopoly” allowed by law through regulation, East Zone concessionaire Manila Water is subject to the extensive oversight and regulation by the MWSS within 23 areas, including Makati, Mandaluyong, Pasig, Pateros, San Juan, Taguig, Marikina, parts of Quezon City, Manila and portions of Rizal.
The PCC said a review by Mergers and Acquisitions Office found that the merged entity would neither have incentive nor ability to engage in customer or input foreclosure in the market.
It said while there is absence of horizontal overlaps between the parties which are not direct competitors, a vertical relationship exists between the parties’ notifying group within the water sector before the merger transaction.
The PCC, however, said that customer or input foreclosure would be unlikely given that the arrangement was designed to service the East Zone even beyond the lifetime of Manila Water’s concession.
The foreclosure is unlikely since operations—including the procurement, development, allocation, rate rebasing and other supply-and-demand dynamics in the water sector—would be highly regulated by MWSS.
Trident Water is a subsidiary of PMHI whose range of business interests span hotel and gaming operations, mining, infrastructure, power generation and distribution and port services.
Conglomerate Ayala Corp. is consolidating its energy, water and transport and logistics businesses under AC Energy Inc. to create a sizeable and agile platform that will boost its foothold in the physical infrastructure space.
The Ayala Group, meanwhile, consolidated its energy, water and transport and logistics businesses under AC Energy Inc. to create a sizeable and agile platform that will boost its foothold in the physical infrastructure space.
It has renamed AC Energy and Infrastructure Corp. to house listed companies AC Energy Philippines Inc. and Manila Water and unlisted unit AC Infrastructure Holdings Corp.
“We believe that consolidating our various infrastructure interests creates a formidable platform with a strong balance sheet and allows Ayala to participate in the many opportunities in infrastructure development in a more significant way,” Ayala chairman and chief executive Jaime Augusto Zobel de Ayala earlier said.