JG Summit buying Meralco stake at discounted price

MANILA, Philippines - JG Summit Holdings Inc., the investment holding firm of tycoon John Gokongwei, is buying into power distribution giant Manila Electric Co. (Meralco) at a substantial discount.

In a regulatory filing, the conglomerate said it agreed to acquire San Miguel Corp.’s 27-percent stake in Meralco for around P72 billion.

“JG Summit intends to finance the acquisition with a combination of debt and equity capital,” the company said.

Brokerage firm Campos, Lanuza & Co. estimates the selling price at around P234 apiece. Hence, it represents more than 14 percent discount compared with Friday’s closing price of P274 and is roughly 18 percent cheaper than Monday’s closing price of P286.

Meralco shares rallied 3.15 percent to P295, JG Summit climbed 2.98 percent to P39.75 while SMC gained 0.8 percent to P75.40 yesterday as the market viewed the deal as beneficial to the parties involved.

On Monday, diversified conglomerate SMC said it is selling its minority stake in utility giant Meralco to the Gokongwei family.

SMC said proceeds of the share sale, which marks its exit from the power distribution giant just five years since it bought bulk of its shares, will bankroll the conglomerate’s various investment opportunities like infrastructure projects and oil and gas acquisitions.

Meralco is majority controlled by the group of Manuel V. Pangilinan that partnered with the Lopez family to secure a controlling block in Meralco.

In July, SMC unloaded 64.33 million shares or 5.7 percent of Meralco’s total outstanding shares to various investors at P270 apiece for a total transaction value of P17.369 billion. It trimmed SMC’s shares in Meralco to 27.1 percent from the previous 32.8 percent.

In October 2008, SMC bought the Government Service Insurance System’s 300.963 million Meralco common shares at P90 apiece.

From its core brewery and food business, SMC has expanded into power production (SMC Global Power Holdings Corp.), downstream oil sector (Petron Corp.), packaging (San Miguel Yamamura Packaging Corp.), airline (Philippine Airlines) and several infrastructure projects like the Caticlan Airport and Skyway.

For its part, JG Summit will again be partnering with the Pangilinan Group.

In 2011, telecommunications giant Philippine Long Distance Telephone Co. acquired Sun Cellular operator Digital Telecommunications Philippines, Inc. of the Gokongwei family through a P69.2-billion share-swap deal.

For infrastructure projects, JG Summit and Pangilinan-led Metro Pacific Investments Corp. earlier formed a joint venture to bid for the expansion and operation of the P17.5-billion Mactan Cebu International Airport project.