Gokongwei backs out of deal with FPC

The Gokongwei group bowed out yesterday from its bid to acquire Hong Kong-based First Pacific Co. Ltd.’s (FPC) controlling interests in both Philippine Long Distance Telephone Co. (PLDT) and Bonifacio Land Corp. (BLC) for around $700 million.

In a letter to FPC dated Oct. 2, Gokongwei group legal counsel Perry Pe said its decision to withdraw the offer was made in the light of First Pacific’s inability to perform and satisfy the terms and conditions of the memorandum of agreement entered into last June 4 between the two parties, the difficulties encountered by FPC in attempting to implement the transaction, and the difficulties encountered by FPC to complete the transaction within the agreed time frame.

He also cited as a fourth reason for terminating the MOA the open resistance of the current management of both the PLDT and Metro Pacific/Bonifacio Land to the transaction.

Pe, in his letter addressed to First Pacific director Anthoni Salim, who engineered the deal, executive vice-president Michael Healy, and general counsel Ronald Brown, said that in view of the expiration of the exclusivity period granted by FPC to the Gokongwei group last Sept. 30, FPC may now pursue the transaction with third parties.

With First Pacific now free to talk to other parties, it may seek to arrive at a deal with Greenfield Development Crop’s Jose Yao Campos and Ayala Corp. which earlier expressed interest in that portion of Bonifacio Land that it up for grabs.

The STAR learned that the Campos-Ayala consortium is preparing to submit anytime now its offer for the purchase of FPC’s 50.4 percent stake in Bonifacio Land. Earlier, Ayala Corp. president Jaime Augusto Zobel de Ayala II confirmed that talks are going on involving the possible takeover of Boni Land. But Ayala Land said it has not reached an agreement on the extent of participation it will have in this (debt restructuring) program.

The June 4 MOA called for the creation of a joint venture company to be participated in two-thirds by the Gokongwei group and one-third by FPC that will take over the latter’s Philippine telecommunications and real estate businesses.

It will be recalled that PLDT management, led by its chairman Antonio O. Cojuangco and president Manuel V. Pangilinan, opposed the conduct by the Gokongwei group of due diligence investigations of the company, one of the conditions required to implement the agreement. The opposition was due to the Gokongwei group being the owners of Digital Telecommunications Inc. (Digitel) which is a staunch competitor of PLDT in the landline telephone business in the country.

It will be recalled that many years back, the Gokongwei’s attempted to buy into San Miguel Corp. (SMC) but were barred from doing so because of a similar anti-competitor provision in the company’s articles of incorporation and by-laws. The Gokongweis’ flagship company Universal Robina Corp. (URC) is in the same business as SMC.

The due diligence review was supposed to serve as the basis for any changes in the terms of the MOA, in particular the pricing aspect, leading to the signing of a definitive agreement.

A copy of the letter to First Pacific was furnished the Philippine Stock Exchange (PSE) in connection with the earlier disclosures made by businessman John Gokongwei Jr. regarding the transaction with FPC.

PLDT said it acknowledges the decision of the Gokongwei group on its MOA with First Pacific, saying this now opens the opportunity for PLDT and the Gokongwei group to cooperate with each other to move the telecommunications industry forward.

"The PLDT board of directors, management, and employees can now focus fully on the work at hand: to meet the objectives of our five-year plan, enhance shareholder value and ensure that PLDT remains the premiere communications company our country can be proud of," it said.

For its part, Metro Pacific Corp., which is the majority owner of Bonifacio Land, said it continues to implement its debt reduction and restructuring program, in which substantial progress has been achieved to date. "Moreover, business prospects continue to improve across the Metro Pacific Group, in particular renewed investor interest and increased development at the Bonifacio Global City, and the return to profitability by subsidiaries Landco Pacific Corp. and Negros Navigation Co.," the company added.

MPC owes another FPC subsidiary Larouge BV $109 million (principal plus interest) and the loan was secured by a 50.4 percent stake in Bonifacio Land, which owns and operates the 150-hectare Fort Bonifacio Global City.

Under the MOA between FPC and the Gokongwei group, the latter was supposed to pay for the loan in three equal annual installments, and, in turn, will own part of the Global City.