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Gokongwei still eyeing PLDT stake
By Rufi Vigilar
MANILA, Philippines (CNN) -- Philippines business conglomerate the Gokongwei group says it remains ready to buy a stake in Philippines Long Distance Telephone Co (PLDT), despite withdrawing its original offer on Wednesday. The group, headed by food and property tycoon John Gokongwei, signed a deal with Hong Kong-based First Pacific earlier this year to acquire its controlling 24.47 percent share of PLDT -- the Philippines largest telco -- and 50.4 percent of Bonifacio Land Corporation (BLC). The stakes were to be tipped into a $925 million joint venture that would be held 67 percent by the Gokongwei group. "We are ready to buy," attorney Perry Pe, Gokongwei's son-in-law and the group's legal counsel, told CNN late Wednesday. "But it now depends on (First Pacific owner) Antony Salim to deliver," Pe added. The Gokongwei group had offered to pay $616.7 million in cash over three years, and assume a $90-million loan by First Pacific subsidiary Larouge to Metro Pacific, the leading member of BLC. BLC is a consortium developing 150 hectares of prime property next to the country's main business district in Makati. Due diligence
The deal collapsed after the Gokongwei group failed to meet a September 30 deadline to conduct due diligence on PLDT. PLDT management had been blocking any financial review by the Gokongwei group, citing a conflict of interest because Gokongwei owns Digital Telecommunications (Digitel), PLDT's main competitor in the land line market. But the Gokongwei group's withdrawal now allows it to negotiate a lower price. A sluggish stock market, the Philippine peso's depreciation, and the dollar-denominated debts of PLDT and BLC are factors impacting on any new deal. However, First Pacific said "no negotiations or discussions in relation to a specific transaction are currently ongoing." First Pacific has had difficulty reining in PLDT management, whose CEO and president, Manuel Pangilinan, is also First Pacific's executive chairman. Pangilinan led First Pacific's takeover of PLDT in 1998. But a falling-out between him and Salim figured in First Pacific's decision to divest its shares in PLDT and BLC. Management resistanceIn accepting the Gokongwei group's termination of the deal, First Pacific cited its own difficulties "including the resistance of the current management" of PLDT and Metro Pacific. First Pacific's share price fell 6.9 percent to $HK0.81 on news of the Gokongwei withdrawal. In Manila, PLDT shares shed 0.9 percent to 277.50 pesos. The Hong Kong firm is unlikely to get a better deal on the PLDT and BLC stakes than that offered by Gokongwei. The Gokongwei offer remains unmatched despite reports of alliances forming between the country's leading businessmen to challenge it. Smart subsidiary"Of course the interest (in PLDT) diminishes" as efforts to acquire the PLDT stake continue to be blocked, Pe said, adding that the Gokongwei group's plans are "being made on a day-to-day basis." PLDT operates a lucrative mobile phone subsidiary, Smart Communications, which posted more than $46 million in first-quarter net income, a 34 percent increase from a year ago. But PLDT has $1.3 billion in loans maturing in the next two years and has recently launched a program to refinance its debt obligations. On the property side of the deal, BLC acquired the right to convert a 150-hectare former military base for commercial and residential use in 1994, beating Makati developer Ayala Land. But a property slump amid the 1997-98 Asian financial has weighed heavily on BLC's development plans.
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