PSE pursues PDS takeover despite Landbank plan

January 22, 2018 - 3:25 PM
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The Philippine Stock Exchange headquarters. BUSINESSWORLD FILE PHOTO

MANILA – The Philippine Stock Exchange (PSE) assured the government it is working to comply with ownership rules, with state-run Land Bank of the Philippines (Landbank) set to compete with the stock market operator for the acquisition of a majority stake in the Philippine Dealing System Holdings Corp. (PDS).

Landbank President and Chief Executive Officer Alex V. Buenaventura plans to recommend to its board of directors this week the lender’s acquisition of “a majority stake or at least 66.67%” in PDS, complicating the plan of the PSE to unify the country’s capital market infrastructure. Landbank’s board meeting is scheduled on Jan. 23.

“Yes, all the more!” PSE Chairman Jose T. Pardo said in a mobile phone message when asked if the local bourse will pursue the acquisition of PDS.

“Our focus though remains in completing our stock rights offering which we expect to happen end-February,” Pardo said.

Last week, the Securities and Exchange Commission (SEC) approved the share sale that will raise P3.16 billion to raise financing for the acquisition of PDS, among others.

Pardo said he has guaranteed Finance Secretary Carlos G. Dominguez III that the proposed stock rights offer will bring down the ownership of trading participants in the local bourse to 19% — one of the key requirements before the PSE can secure the corporate’s nod for a merger with PDS.

“[N]o industry or business group shall beneficially own or control, directly or indirectly, more than 20% of the voting rights of the Exchange Controller,” according to Rule 33.2 (c) of the SRC.

Dominguez singled out the failure of the PSE to be compliant with the above-mentioned rule as the reason for Landbank’s move to take control of PDS.

Currently, the Landbank owns 1.56% of PDS through the Bankers Association of the Philippines (BAP).

“With waivers of preemptive rights made by all existing shareholders, ownership levels will now comply with the law.

This was a separate commitment we made to the DoF [Department of Finance] Secretary,” Pardo said.

“We likewise assured him that PSE, with SEC oversight, will have in place a system which will automatically stop trade beyond the 20% per industry ownership level,” he added.

Sought for comment about the PSE’s plan to acquire PDS, SEC Chairperson Teresita J. Herbosa told reporters last week: “They have to do some little things before we get to that point.”

“We have to see that the stock rights offering will achieve its purpose which is to make the share structure in accordance with what the law provides, which is one should not achieve the industry limit of 20%.”

The SEC approval for the PSE-PDS merger is one of the final steps in closing the deal that began back in 2013, when the PSE proposed to merge the two markets for synergies in operations. The corporate regulator initially rejected the merger in 2016 after denying the local bourse’s petition for an exemption to the SRC rule.

The PSE has made renewed attempts to buyout the PDS shareholders after signing new share purchase agreements with them that gave the former a 69.03% total stake in the latter.

Since June last year, the PSE has inked SPAs with the BAP; Whistler Technologies Services, Inc.; Investment House Association of the Philippines; The Philippine American Life and General Insurance Co.; FINEX Research and Development Foundation, Inc.; San Miguel Corp. and Tata Consulting Services Asia-Pacific Pte. Ltd.

‘AGGRESSIVE BID’

Meanwhile, Dominguez, who is an ex-officio chairman of Landbank, on Friday said the bank is planning to make an “aggressive bid” to secure a majority stake in PDS.

“Landbank asked my permission, so I said if it’s a good business for you, yes. If it doesn’t make money for you, don’t do it. But they said they will make money from it and Landbank has to increase its profits because the more money they make, the more dividends they give to the government. So it only happens if it makes commercial sense. So go ahead, it will achieve our goals to improve the efficiency of the capital market,” the Finance secretary told reporters.

Dominguez said he been talking to PSE officials since September 2016 to bring down the broker ownership, but has not made progress ever since.

“It’s been 16 months. Maghihintay pa ba kami? (Will we still wait?) In the meantime, we cannot improve the domestic capital, we cannot really push the improvement of the domestic capital market. Landbank looked at it, it’s a profitable business, they said they’re willing to acquire it,” said Mr. Dominguez. — with Elijah Joseph C. Tubayan