PLDT asks FPC to junk deal with Gokongwei

Telecommunications giant Philippine Long Distance Telephone Co. (PLDT) has called on parent firm First Pacific Co. Ltd. (FPC) to abandon its agreement to sell part of its controlling stake in PLDT to the Gokongwei group in order to further arrest the continuing decline in the company’s share price.

The exclusivity period granted by First Pacific to the Gokongwei group under the June 4-signed sales agreement covering part of the former’s 24.4-percent stake in PLDT and 50.4 percent interest in Bonifacio Land Corp. is scheduled to expire three days from now or on Sept. 30. There is, however, no word yet, whether the period will be extended or if the transaction will be abandoned altogether, since the conditionalities that are supposed to complete the transaction have not yet been met.

Three days before the expiry of the exclusivity period, the Gokongwei group has yet to conduct a due diligence investigation of PLDT and BLC, and according to the former, it has no plan of waiving such due diligence.

"PLDT honors and respects the exclusivity period between First Pacific and JG Summit group that will end on Sept. 30. However, we would like to reiterate the PLDT board’s unanimous decision for First Pacific to abandon this fundamentally flawed transaction and work with the board and management of PLDT in its continuing efforts to revitalize and strengthen the operations and financial results for the benefit of all shareholders," PLDT vice president and spokesperson Menardo Jimenez Jr. said in a statement.

PLDT officials noted that the share price of PLDT has significantly dropped since First Pacific first announced that it was selling its controlling shares to the Gokongwei group. The drop in share price occurred even as PLDT’s financial performance for the first half of 2002 exceeded market expectations. Net income of PLDT doubled to P2.8 billion while consolidated EBITDA (earnings before interests, taxes, depreciation and amortization) surged by 15 percent to P22.7 billion.

The drop likewise occurred despite PLDT having successfully completed its liability management program covering around over a billion dollars maturing between 2002 and 2004.

Officials likewise noted that numerous international equity research firms point to the issue as the primary reason for the drop in share price. These include Morgan Stanley which noted that "in the near term, the problems between and First Pacific will likely act as an overhand," BNP Paribas Peregrine which said that "it maintains its negative outlook weighed down by poor industry prospects and the ongoing boardroom battle" ATR-KIM ENG which said that uncertainties arising from the Gokongwei bid will likely overshadow the company’s resurgent rise in earnings the past few quarters, and UBS Warburg which said that the investor focus has shifted from the company’s operations to uncertainties involving unresolved issues of control.

"PLDT’s share prices has suffered far too long from the decision of First Pacific to sell controlling shares of PLDT to a competitor. We see no reason why this uncertainty should be carried past Sept. 30 and reiterate the PLDT board’s call for First Pacific to work with us and abandon this flawed transaction," he said.