First Pacific’s problem

There was some confusion regarding a recent foreign wire service report that the Capital Group has sold a part of its shares in the Philippine Long Distance Telephone Co. (PLDT) at the US stock market. US-based Capital Group, under its global equity fund, is the third largest foreign shareholder in PLDT, next only to First Pacific Co. Ltd of Hong Kong and NTT Communications Corp. of Japan, and of course, any unloading of that magnitude will raise not a few questions.

The sale becomes more interesting in the light of earlier reports that the group of Antonio "Tonyboy" Cojuangco and Manny Pangilinan was wooing Capital Group to sell its shares in PLDT to the group to further the latter’s bid of acquiring a controlling interest in PLDT.

Some PLDT insiders said that the said wire report was subsequently corrected, and that the sale was just part of the "buying and selling of shares of PLDT "in the stock market which the Capital Group does on a regular basis. The insiders also deny any involvement of Cojuangco in the said buying, although somebody said he has something to do with it. Which is which?

It doesn’t make sense for Cojuangco and Pangilinan or any person or group for that matter to shell out money now for the sole purpose of trying to wrest control over PLDT. It’s just a week before the Sept. 30 exclusivity period, whereby First Pacific which owns 24.4 percent of PLDT cannot entertain offers other than that by the Gokongwei group. The PLDT management has succeeded in preventing the sale agreement between First Pacific and the Gokongwei group from being executed, or at least has succeeded in stalling it, by preventing the latter from conducting the necessary due diligence of the companies sought to be acquired.

In a recent conversation with this writer, Gokongwei group patriarch John Gokongwei Jr. says no due diligence has been conducted and that they have no plans of waiving it. He adds that if First Pacific cannot facilitate the due diligence, then there will be no sale, and the Gokongweis do not have to pay. It’s that simple, Mr. Gokongwei emphasizes. The problem is between First Pacific and PLDT – in particular Manny Pangilinan – to resolve and that he was just a willing buyer. And while PLDT may be an attractive buy, Mr. Gokongwei says he has no plans of going out of his way to make the deal happen. Why would I, he says.

So what could possibly happen after Sept. 30? The Gokongwei Group and First Pacific can either extend the exclusivity period to beyond Sept. 30 and continue to try to make the deal happen, or First Pacific can entertain other offers. But from who? The two parties can drag the deal until next year, or until First Pacific can try to replace its proxy nominees in the PLDT board in order to make sure that the latter will not oppose the proposed transaction with the Gokongweis. Everything will of course depend on what the Salim family, which controls First Pacific, has to say. In the first place, it was Anthoni Salim who approached Mr. Gokongwei and offered to sell First Pacific’s stake in PLDT and Bonifacio Land. He alone can decide whether to sell or not sell, and to who. With the concurrence of the other First Pacific shareholders, of course.

FDI drops

The most recent world investment report pointed to a very sad reality – that foreign direct investments declined by more than half in 2001, the largest decline in 30 years.

World FDI fell 51 percent in 2001 to $735 billion, the first decline in a decade, according to the report prepared by the United Nations Conference on Trade and Development (UNCTAD). Most of the decline – 59 percent – occurred in developed countries while only 14 percent was in developing countries. The decline, it said, reflects a decrease in cross-border mergers and acquisitions, which are expected to remain low this year. The US remained the largest FDI recipient and the largest foreign investor.

The downturn was strongly influenced by the worldwide recession, especially in the world’s three largest economies, namely the US, European Union, and Japan and a sharp slide in the stock market activities of industrial countries.

Belgium/Luxembourg, Hongkong, China and Angola are the best-performing host economies for FDI while the US, Sweden, and Singapore have the highest potential.

The report however paints a promising‚ long-term outlook for FDI as transnational corporations expand their role in the global economy. It said foreign affiliates now account for 11 percent of world gross domestic product compared to seven percent in 1990.

Transnational corporations are playing a major role in the exports of developing countries, the report also noted. In most of the countries with the largest gains in export market shares, the role of TNCs in those exports has increased over time. In China for instance, the share of foreign affiliates in exports rose from 17 percent in 1991 to 50 percent last year. In Korea, strong export growth was said to have been achieved without a strong presence of foreign affiliates, although non-equity relationships with foreign TNCs played a key role.

Letters

"I read with pleasure and thanks your article entitled ‘On Illegal LPGs’. I agree fully with your statement, ‘there can be no compromise when lives are at stake.’ In recent years, fire incidents caused by explosion of LPG tanks have increased at alarming levels, endangering lives and properties. It should be stopped. We are currently beefing up measures to eliminate illegitimate businesses and substandard LPG products in the market. Our aim is to protect the consumers and their properties. But in order to succeed, we need the support of the consumers, particularly by being more discriminating, and the vigilance of the media. Thanks for advocating our cause. I am sure the Filipino consumers are most grateful – Secretary Vincent S. Perez Jr., Department of Energy

For comments, e-mail at [email protected]