Sy-Coyiuto tandem pushes tax-free share-swap deal in NGCP

MANILA, Philippines - The tandem of Henry Sy Jr. and Robert Coyiuto Jr. may bring to court their bid to push through with a tax-free share-swap deal that would effectively transform their publicly listed Synergy Grid and Development Philippines Inc. as the holding company of the National Grid Corp. of the Philippines (NGCP).

NGCP operates, maintains and develops the country’s power grid. It holds the 25-year concession contract to operate the country’s power transmission network. Filipino-owned entities One Taipan Holding Corp.’s Monte Oro Grid Resources led by Sy and Pacific21’s Calaca High Power Corp. led by Coyiuto control the 60 percent stake in NGCP. The remaining 40 percent is held by State Grid Corp. of China (SGCC) as its technical partner.

In an interview last week, Synergy Grid corporate secretary Vicente Gerochi IV said an appeal for the proposed tax-free share swap remains pending with the Office of the President after Internal Revenue Commission Kim Henares thumbed down the deal.

Synergy Grid approved the share swap in 2011 wherein new shares of the company will be swapped for shares of Sy Jr.’s One Taipan Holdings and Coyuito-led Pacifica21 Holdings Inc., the two companies that control NGCP.

Under the proposal, the two holding companies of Sy and Coyiuto would be issued 100 million shares of Synergy Grid at P20 per share.

The Securities and Exchange Commission (SEC) approved the share swap in 2011 but for it to push through without capital gains and documentary taxes, the BIR must issue a ruling allowing the tax-free exchange.

“The share swap has not been approved. We have a pending application with the Office of the President. If it is denied that is the time we go to the court,” Girochi said.

The BIR only approved the tax-free status of the share swap with Sy’s OneTaipan but not with Coyuito’s Pacifica21.

“Upon effectivity of the share swap, Synergy will own 68.34 percent of Pacifica21 and 100 percent of OneTaipan,” Synergy said.

Girochi said the tax-free merger is allowed under the Tax Code.

“We’re still hoping it will be approved. It’s now with the Office of the President and we think we have a good legal basis. If OP denies this, we can consider going to the court,” he said.