First Pacific, Lopezes seal revised Meralco deal

MANILA, Philippines - The Lopez Group and Hong Kong-based First Pacific Co. Ltd. (FPC) have entered into an amended agreement which will prevent the sale or transfer of the Lopezes’ voting common shares in Manila Electric Co. (Meralco) for a period of three years, except in favor of FPC subsidiary Metro Pacific Investments Corp. (MPIC).

The same stand-still arrangement allows the sale of the remaining 13.4-percent stake of the Lopez Group in Meralco during the three-year period to third parties, subject to certain conditions.

As this developed, MPIC has extended an P11.2-billion loan to Lopez-owned First Philippine Utilities Corp. (FPUC). The loan is payable on or before June 30, 2010 and is covered by a pledge over 138. 36 million common shares in First Gen Corp., also owned by the Lopez Group, and 30.09 million common shares in Meralco. The loan was earlier supposed to be payable on or before March 31, 2010.

The loan was part of the conditions precedent to the sale by the Lopez Group of a 6.7 percent stake, or half of its remaining shareholdings, in Meralco to MPIC under a call option agreement.

The parties to the amended, consolidated, and restated cooperation agreement dated Nov. 20, 2009 include MPIC, Pilipino Telephone Inc. (Piltel), Philippine Long Distance Telephone Co. (PLDT) which constitute the MPIC/Piltel group and Lopez Inc., First Philippine Holdings Corp. (FPHC) and FPUC for the Lopez Group.

Observers pointed out that the amendment to the original cooperation agreements between the Lopez Group and PLDT/MPIC/Piltel will secure MPIC’s chances of acquiring the Lopez Group’s remaining stake in Meralco, which other groups including San Miguel Corp. and the Henry Sy Jr.-led Triratna Holdings are attempting to purchase.

They added the amendments will clarify once and for all the right of first refusal and tag-along rights of the Lopez Group and PLDT/MPIC/Piltel with respect to their respective shares in Meralco.

MPIC earlier entered into a call option agreement to acquire half of the Lopez group’s remaining 13.4 percent stake in Meralco. Including the 14.7 percent stake earlier acquired from the PLDT Beneficial Trust Fund, MPIC will have a 21.4 percent interest in Meralco once it decides to exercise the call option on or before March 31, 2010.

Piltel, meanwhile, owns a 20 percent stake in Meralco earlier acquired from FPHC.

San Miguel, on the other hand, has a 27 percent stake in Meralco although it claims to control about 43 percent of the public utility, together with allies.

One of the conditions set for a sale to parties other than MPIC is that the aggregate company shares that the Lopez Group may sell during the following periods shall not exceed: first, five million shares during the period from the date of the agreement to June 30, 2011; second, five million shares during the period from July 1 to Dec. 31, 2011; and third, 20 million shares during the period from July 1, 2012 until the end of the stand-still period.

The second condition is that the shares proposed to be sold are subject to the respective rights of first refusal and tag-along rights of MPIC and Pilipino Telephone Inc. (Piltel) under the agreement. Piltel is 97 percent owned by Smart Communications Inc. which, in turn, is wholly owned by PLDT.

The Nov. 20 agreement amended, consolidated, and restated the March12, 2009 shareholders’ cooperation agreement between the Lopez Group and the PLDT BTF with respect to certain shares of voting common stock in Meralco owned by the Lopez Group and BTF.