First Pacific in multiple Filipino deals

The Hong Kong-listed investment manager has dived into the telecoms and power sectors through four transactions in a week.

Affiliates of Hong Kong-based investment manager First Pacific have carried out four large transactions in the Philippines' telecommunication and power sectors.

The largest and latest deal is the $1.5 billion acquisition of San Miguel Corporation’s telecom assets by two domestic companies. 

Philippines Long Distance Telephone Company (PLDT), which is 25.6 percent owned by First Pacific, has agreed to purchase 50 percent of the business from San Miguel, with Globe Telecom acquiring the remainder. 

The total acquisition cost is PHP70 billion ($1.5 billion; €1.34 billion), including PHP52.8 billion of equity and PHP17.2 billion of debt. PLDT’s share amounts to one half of both. 

The acquisition is expected to help the National Telecommunications Commission and the government improve the available radio frequency spectrum for mobile services.  

“With improved spectrum distribution, we expect to see rapid improvement of telecommunications services for all mobile customers in the Philippines and greater cost efficiencies for PLDT,” said Manuel V. Pangilinan, managing director and chief executive officer at First Pacific. 

PLDT intends to finance its PHP26.4 billion equity portion through a combination of new debt, balance sheet cash and proceeds from the recent sale of a 25 percent stake in a local power company. 

PLDT also agreed to sell a 25 percent stake in Makati City-based Beacon Electric Asset Holdings to Metro Pacific Investment Corporation (MPIC). MPIC, a First Pacific’s affiliate and the Philippines' biggest infrastructure company, already owned 50 percent of Beacon Electric before acquiring the additional stake.

The 25 percent stake is valued at PHP26.2 billion, PHP17 billion of which will be paid in cash immediately and the rest to be paid in installments over the next four years. PLDT will retain a 25 percent stake in Beacon Electric. 

The transaction follows Beacon Electric’s recent acquisition of a 56 percent stake in Global Business Power for PHP22.1 billion. Global Business Power is an electricity generator in the Visayas region of the Philippines which has an aggregate capacity of 852MW in both operational and developmental projects. 

The deal also increases MPIC’s interest in Global Business Power from 28 percent to 42 percent. At the same time, since MPIC and Beason Electric also own 15 and 35 percent stakes respectively in Manila Electric Company (Meralco), the biggest electricity distributor in the Philippines, the deal lifts MPIC’s direct and indirect interest in Meralco to 41 percent. 

Last but not least, MPIC introduced a new shareholder last week by selling a mix of new and secondary shares to GT Capital Holdings, a listed conglomerate and primary investment vehicle held by the Philippines' Ty family. 

The combined shares, worth $643 million, account for a 15.6 percent stake in MPIC. Retaining a 42 percent stake in MPIC after the transaction, First Pacific plans to use the proceeds for debt reduction. The transaction marks a new alliance between the two business groups. 

The Hong Kong-listed investment management and holding company manages a portfolio of $7.9 billion. Its principal business interests relate to telecommunications, consumer food products, infrastructure and natural resources. It has a footprint in the Philippines, Indonesia, Singapore and Australia.