Hong Kong’s First Pacific in four Filipino deals

The Philippines’ affiliates of Hong Kong-based investment manager First Pacific have carried out a number of multi-million transactions in the telecommunications and power sectors.

The largest and latest transaction among four recent transactions is a $1.5 billion acquisition of San Miguel Corporation’s telco assets by two domestic telecoms companies. 

Philippines Long Distance Telephone Company (PLDT), with a 25.6 percent stake owned by First Pacific, has agreed to purchase 50 percent of the equity interest of the telecommunications business of San Miguel Corporation, with Globe Telecom acquiring the remaining 50 percent stake. 

The total acquisition cost is PHP70 billion ($1.5 billion; €1.34 billion) which includes PHP52.8 billion equity and PHP17.2 billion of total liabilities assumed. PLDT’s share amounts to PHP26.4 billion in equity and PHP8.6 billion in assumed debt. 

Customers in the Philippines will enjoy better quality services across the fixed and mobile networks of PLDT’s mobile phone brands. The acquisition is also expected to help the National Telecommunications Commission and the government provide improved utilisation of 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 a recent divestment of 25 percent stake in a local power company. 

The divestment details were also announced yesterday with the above telecommunications deal.

PLDT 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 biggest infrastructure company in the Philippines, has already owned 50 percent of Beacon Electric before acquiring the additional stake.

The 25 percent interest in Beacon Electric is valued at PHP26.2 billion, PHP17 billion of which will be paid in cash immediately and the rest to be paid in instalments 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 with 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 a 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 significant 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 Ty family in the Philippines. 

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

The Hong Kong-listed investment management and holding company has its current investment portfolio valued at around $7.9 billion. Its principal business interests relate to telecommunications, consumer food products, infrastructure and natural resources, with presence in the Philippines, Indonesia, Singapore and Australia.