San Miguel gets Landbank shares in Meralco at 83% discount
The power unit of conglomerate San Miguel Corp. has acquired P23 billion worth of shares of utility giant Manila Electric Co. for just P3.89 billion. This was after winning a court dispute that compelled the state-controlled Land Bank of the Philippines to sell based on 17-year-old terms.
Through a special block sale at the Philippine Stock Exchange on Wednesday, Landbank transferred to San Miguel Global Power about 43.23 million Meralco shares, or 3.8 percent stake, for P90 per share. This is the price under a disputed 2008 share-sale agreement that the courts had directed the state-owned bank to follow.
San Miguel’s buy-in price marked a hefty P455 or 83-percent discount to the P545-per share closing price of Meralco on Wednesday.
This happened as the prolonged court litigation and subsequent loss to San Miguel prevented Landbank from monetizing its Meralco shares at prices closer to market valuations, or even from considering a deal with any other party.
“[It’s] old transaction,” SMC chair Ramon S. Ang said in a text message.
He was referring to the disputed share purchase agreement dated Dec. 2, 2008, between Landbank and SMC Global Power. The deal was struck at the height of the tug-of-war for control of Meralco between San Miguel and the Metro Pacific group of tycoon Manuel V. Pangilinan.
Back then, SMC was accumulating shares from the open market and other institutional investors that included Landbank. Even the Lopez family, which then controlled Meralco, was split between those who favored San Miguel and those who sided with Metro Pacific.
For 17 years, the sale had not been consummated as the Office of the Ombudsman afterwards investigated Landbank officials for graft, preventing the transfer of shares. Its former officials were accused of striking a deal that allegedly favored Global 5000 Investment Inc., the precursor of SMC Global Power, then led by the late tycoon Roberto Ongpin.
The Meralco proxy war eventually tilted in favor of Pangilinan’s group in 2010 when the Lopezes agreed to sell most of their shares to the former. Since then, Meralco has been under the control of Metro Pacific group.
By 2013, San Miguel decided to exit Meralco and sell its 27 percent stake to the Gokongwei group.
But the shares committed to San Miguel Global Power remained with Landbank since then.
San Miguel thereafter sued Landbank to enforce the original agreement. But the latter sought legal remedies.
Landbank argued that the 2008 share purchase agreement was “not a contract of sale but a contract to sell.” Considering that the shares remained with Landbank, the bank contended that a separate deed was necessary to transfer ownership to San Miguel.
But in the latest ruling dated March 20, 2023, the Court of Appeals quashed the motion for reconsideration that Landbank had filed. The state-owned bank was held accountable for “continuous inaction” on the pleas of SMC Global for a long period of time.
As such, Landbank was forced to finally transfer the disputed shares to San Miguel.
Jayniel Carl Manuel, equity trader at Seedbox Securities, Inc., said it would be “a logical move” if ever SMC decides to sell its stake in Meralco.
“Proceeds could be redirected toward high-impact projects or strategic investments that align with their broader growth agenda,” Manuel said in a message.
Manuel also said that “a well-communicated statement” from Meralco could help allay fears about investors offloading their shares in response to this development.
“[This] could actually add positive momentum,” the analyst said.
“A clear statement from SMC outlining the rationale and future plans would help reinforce market confidence and minimize speculation,” he added.
