MPIC to exercise call option on Meralco stake

MANILA, Philippines - Metro Pacific Investments Corp. (MPIC), the local investment arm of Hong Kong-based industrial conglomerate First Pacific Co. Ltd., said yesterday it would exercise on March 30 its option to acquire an additional 6.7 percent in power utility giant Manila Electric Co. (Meralco).

At the same time, Meralco disclosed to the Philippine Stock Exchange that its unit Beacon Electric Asset Holdings Inc. has inked an P18-billion corporate notes facility agreement with First Metro Investment Corp. and PNB Capital & Investment Corp. to fund the purchase of Meralco shares. The notes will carry a maturity of 10 years.

Beacon Electric, which holds the combined 28.2 percent interest of MPIC and sister firm Pilipino Telephone Corp., will become the single largest shareholder of Meralco upon completion of the call option.

MPIC is acquiring over 74.7 million shares of Meralco through a call option at P300 per share or a total cost of P22.4 billion.

The P18-billion loan facility will be secured by a certain number of Meralco shares to be acquired by Beacon Electric, and will be divided into a fixed rate tranche of P11.8 billion and a floating rate tranche of up to P6.2 billion.

If the call option is exercised, the amended shareholders agreement will allow the Lopez Group to nominate one Meralco director for their remaining 6.7 percent Meralco stake while Beacon Electric and Piltel will be allowed to nominate four Meralco directors.

Together, the Lopez Group and Beacon Electric/Piltel will be able to nominate five out of the nine non-independent directors of the power retailer.

First Pacific has agreed to subscribe to P6.6 billion worth of MPIC’s three-year convertible bonds to partially fund its subscription of Beacon shares.

The Lopez Group, through First Philippine Holdings Corp., will continue to vote as one bloc with the group of Metro Pacific by virtue of a standstill agreement signed earlier that prevents the sale of any of the remaining Meralco shares owned by the Lopez Group to third parties for a period of three years. Together, they control 48 percent of the utility while about nine percent is held by the public.

Food-to-power conglomerate San Miguel Corp., on the other hand, holds a 27 percent interest in Meralco while ally Global  5000 Investments, headed by by former Trade Minister Roberto V. Ongpin, owns about 10 percent.

Meralco, which owns the country’s largest power franchise, more than doubled its net income last year, mainly driven by higher prices and electricity sales volume.