GMA Network eyes foreign capital via SPV route

GMA Network Inc. will form a special purpose vehicle for the issuance of Philippine deposit receipts (PDRs) to allow foreigners to invest in a media enterprise whose ownership is constitutionally limited to Filipinos.

Based on a proposal submitted to the Securities and Exchange Commission (SEC), the new company will acquire existing shares currently owned by GMA’s major shareholders, and new shares to be issued by the network.

The new company will then create and issue PDRs over the shares held by it. For as long as the PDRs are not exercised, the new company shall remain the owner of the shares underlying in the PDRs and shall retain and exercise full voting rights over such shares.

The sale of the PDRs will coincide with GMA’s initial public offering (IPO), tentatively scheduled in the second quarter of the year. The network expects to raise about P9 billion from the sale of 20 percent to 30 percent of its equity.

Holders of the PDRs shall enjoy only the economic benefits of the shares underlying the PDRs without voting and other ownership rights. In the event of cash dividend or other cash distributions declared and paid on the underlying shares, the new company will pay the holders a counterpart cash distribution.

Moreover, holders of the PDRs will have the right to exchange their PDRs to common shares by payment of an exercise price and submission of a written notice under terms and conditions contained in a PDR instrument to be executed by the new company in favor of PDR holders at the completion of the offer.

According to GMA, the PDRs will be a critical tool for generating international institutional investor interest in the network, achieving an optimal valuation and ensuring liquidity for the stock in the aftermarket. A similar approach has been successfully used by ABS-CBN, in its public shareholding structure.

The SEC is considering approving GMA’s proposal provided that the network allocate a sufficient number of underlying common shares which shall be distinct and separate from the common shares to be distributed within the country through an IPO.

GMA has already raised its authorized capital to P5 billion from P2 billion in preparation for the maiden offering of its shares. The new capitalization comprises P3.5 billion worth of common shares with a par value of P1 each and P1.5 billion worth of preferred shares with a par value of P0.20 each.

GMA is eyeing a net profit of more than P2 billion this year, driven by the impressive performance of its international operations and the successful launch of its UHF channel. In 2005, the network is looking at posting a P2-billion net income, 30 percent higher than the P1.5 billion reported in 2004.

The network hopes to penetrate Europe, Rome and England next year to tap the huge market of overseas Filipino workers in these areas.

It has set aside P1 billion this year for the continued expansion of its regional operations and the establishment of two state-of-the-art studios to house more programs.

GMA aims to broaden its presence nationwide as it gears towards dominating provincial programming after unanimously leading in TV viewership ratings across Mega-Manila.