PSE seeks financial adviser for sale of shares under SRC

The Philippine Stock Exchange (PSE) is scouting for a financial adviser to help it determine the best option to comply with the 20-percent industry ownership limitation requirement under the Securities Regulation Code (SRC).

PSE president Francis Lim said the move was in response to a letter sent by the Securities and Exchange Commission, reminding the exchange to comply with the ownership limitation rule. Under the SRC, no single industry should own more than 20 percent of the exchange’s total outstanding capital stock.

Lim said he expects to pick a financial adviser by December or January next year.

Among the options being considered include going public, finding a strategic partner, implementing an employee stock option plan, or a combination of all three options.

The industry limitation requirement was brought about by the need to reduce brokers’ control in the bourse and to allay fears that the exchange is an "old boys’ club."

At present, brokers hold 35.33 percent of the PSE.

This means that the exchange would only need to divest 15.33 percent to comply with the 20-percent single industry ownership limit.

PSE shares are trading at P145 per share and have a book value of P99.34 as of September 2005.

In 2004, the PSE sold 40 percent of its shares to several institutional investors for P733 million. Among these investors include the Government Service Insurance System, PLDT Beneficial Trust Fund, San Miguel Corp. Retirement Fund, Kim Eng Investment Ltd., KE Strategic Pte. Ltd., A. Soriano Corp. and Equinox Partners. The sale reduced brokers’ shareholdings in the PSE to just 60 percent from nearly 100 percent.

The sale, however, got the ire of a group of brokers who alleged that the deal was consummated in undue haste and lack of transparency and was not even duly approved by the PSE board.

The group alleged that the private placements violated multiple rules of the Corporation Code, the SRC, and the PSE’s own rules on additional listing of shares.

The rule on additional listing of shares provides that a transaction such as a private placement conducted by a listed company is subject to the approval of the stockholders of the company.

The group claimed that the offer price of P119.50 per share was extremely low and grossly disadvantageous to existing PSE shareholders. Compared to transactions at the time of placement of P195 to P200 per share, the subject price of P119.50 per share represented only a small premium over its book value of P105 per share and did not give value to the PSE franchise and its property assets.

Aside from this, the group also took note of the possible "conflict of interest" situation on the part of ATR-Kim Eng Capital Partners Inc., PSE’s financial advisor.