Piltel reduces Meralco stake with special block sale to Beacon Electric for P23.13 billion

MANILA, Philippines - Philippine Long Distance Telephone Co. (PLDT) unit Pilipino Telephone Inc. (Piltel) sold yesterday154.2 million of its common shares in Manila Electric Co. (Meralco) to Beacon Electric Asset Holdings Inc, for P23.13 billion, reducing its stake in the power distribution utility from 20 percent to 6.1 percent.

The transfer of Piltel’s 13.9 percent stake in Meralco to Beacon was effected in the Philippine Stock Exchange yesterday through via a special block sale.

Beacon is the special purpose company jointly owned by Piltel and Metro Pacific Investments Corp. (MPIC) whose sole purpose is to hold Piltel’s and MPIC’s shares in Meralco, which amount to 392.5 million shares, equivalent to 34.8 percent of Meralco’s outstanding common shares.

Also completed yesterday was Piltel’s investment of P23.13 billion by way of subscription to 1.156 billion common shares of Beacon for a subscription price of P20 per share as well as Piltel’s purchase of 12,500 Beacon common shares from MPIC for a total consideration of P12,500.

As a result of these transactions, Piltel’s direct common shareholdings in Meralco has decreased to 68.8 million shares representing 6.1 percent of Meralco.

Piltel likewise became the owner of 50 percent of the outstanding common stock of Beacon, which in turn, has increased its shareholdings in Meralco from 238.3 million to 392.5 million shares representing 34.8 percent of Meralco.

Piltel’s stockholders earlier approved the change in the company’s name to PLDT Communications and Energy Ventures Inc, as well as in the primary purpose to  reflect Piltel’s new business, particularly its investment in Meralco.

They also approved the sale and transfer of Piltel’s 154.2 million shares in Meralco to Beacon as well as the P23.13 billion investment in Beacon shares.

They also approved the consolidation in Beacon of 154.2 million Meralco shares owned by Piltel and 163.6 million shares owned by MPIC, amounting to 28.2 percent of Meralco.

Beacon chairman Manuel Pangilinan, also chair of Piltel and MPIC, earlier said while Piltel is just a holding company for its direct and indirect stake in Meralco, they are currently reviewing what other assets will be placed under it or businesses it will be operating in the future.

Piltel president Napoleon Nazareno revealed that as a holding company for shares in Meralco, PCEV will likely be handling new synergy businesses being developed between PLDT and Meralco, such as broadband over power lines and prepaid electricity, among others.

At present, PCEV (Piltel) is 99.5 percent owned by Smart Communications, which, in turn, is wholly-owned by PLDT. Pangilinan said they are still trying to acquire the remaining 0.5 percent in the hands of small shareholders.

Asked about plans to delist Piltel from the local stock exchange, Pangilinan stressed that this matter is still being reviewed, although in the past, he has said that it may no longer make sense for it to be publicly listed, considering that 99.5 percent is already owned by Smart.

Piltel earlier announced that its reported net income for the first quarter of 2010 stood at P458 million, 86 percent lower than the P3.25 billion generated during the same quarter last year.

Core net income, before exceptionals and one-time items, declined to P470 million from P3.2 billion in the same period in 2009, mainly comprised of Piltel’s equity share in the net income of Meralco.

Piltel acquired its 20 percent investment in Meralco in July 2009. The P3.2 billion recorded in the first quarter of 2009 primarily represented Piltel’s net income relating to its cellular business which was sold and transferred to Smart in August 2009.

Starting the second quarter of 2010, Piltel’s financial results will reflect the equity accounting of  its 50 percent share in Beacon.

The results will also start including Piltel’s share of Meralco’s earnings arising from the 68.8 million Meralco common shares (6.1 percent interest) retained by Piltel after the transfer of its 154.2 million shares to Beacon. Piltel’s effective interest in Meralco however, remains at 20 percent.

With the exercise by Beacon of the option to acquire the Lopez Group’s 6.6 percent stake (around 74.7 million common shares) in Meralco, the Pangilinan group now controls over 41 percent of the power utility.