PLDT acquisition of GMA faces delay

The acquisition by the Philippine Long Distance Telephone (PLDT) group of GMA Network Inc. may be delayed due to an ongoing review of the initially agreed purchase price of P8 billion.

According to Mediaquest president Antonio Samson, while there were no big surprises during a due diligence conducted of the country’s second biggest broadcast company, some of the findings "may have price tags."

"It’s like buying a house. If the roof leaks, the buyer will have to spend for that so the cost will be deducted from the purchase," he said.

Mediaquest is a wholly owned subsidiary of PLDT’s retirement fund which earlier entered into a memorandum of agreement with the owners of GMA for the purchase of the company at an equity value of P8 billion representing a 66.67-percent stake.

Also yesterday, PLDT officials revealed that they are still in talks with a third party foreign strategic investor that will put in both money and technical expertise into GMA.

Three groups of congressmen have already filed their respective resolutions asking for an investigation into the proposed purchase by Mediaquest of GMA. They said that Mediaquest is simply a shell company of PLDT being used to circumvent a constitutional prohibition against foreign ownership of a public utility. PLDT is partly foreign owned.

Samson said that they have yet to receive copies of the resolutions, but noted that there are legal mechanisms to allow foreign participation in a public utility. "Just look at ABS-CBN which is listed in the US stock exchange which means that they are selling shares to foreigners," he said.

The PLDT group has just conducted a due diligence of GMA following the MOA signing. "We are now in the process of submitting our findings," he said.

Samson said that there is always the possibility that the owners of GMA, namely the groups of Felipe Gozon, Menardo Jimenez, and Gilberto Duavit, may not agree with the findings of the PLDT group. "There can still be a dealbreaker," he said.

According to the MOA, GMA has an enterprise value of P14.5 billion representing 100 percent of the company according to the balance sheet and income statements. The broadcast company, Samson revealed, has debts amounting to around P2 billion which when deducted from the enterprise value will reveal an equity value of P12.5 billion (100 percent of the stocks).

A PLDT official revealed that one of the issues being raised is the use of the GMA Network building in Quezon City, the cost of which made up for a large part of the P2-billion debt.

The official said that some floors in the building are being used by businesses of the present owners that have nothing to do with the broadcast and radio businesses. "This may have to be deducted from the company’s value," he said.

Meanwhile, Samson said that the owners may also opt to spin off or sell some of its assets such as GMA Films. "In this case, we will have to review the price," he pointed out.

But on the side of the PLDT group, Samson noted that they are ready to close the deal and the financing is already available.

In a related development, the Mediaquest president revealed that Citynet Channel 27 which is owned by GMA will have to be reformatted once the acquisition is completed.

One reason cited by Samson is that Channel V is a music channel and thus has the same offering as Nation Broadcasting Corp’s Channel 41 which is the MTV Channel. The PLDT group owns NBC.

In the case of NBC’s radio business which may be redundant with Radio GMA once the purchase is completed, Samson said that one way to raise additional funds as well as to minimize overlaps is to lease the radio facilities of either.