Time running out for PSE to take over PDSHC

THE ODDS are stacked against the Philippine Stock Exchange, Inc. (PSE) for its acquisition of the Philippine Dealing System Holdings Corp. (PDSHC), as it has yet to secure regulatory approval for the deal even as share purchase agreements (SPAs) with stockholders of the fixed-income bourse are set to expire by the end of the month.

The bourse operator on Thursday said it still hopes to be exempted by the Securities and Exchange Commission (SEC) from a regulatory ownership restriction before March 31, the same time the SPAs covering around 72% of PDSHC shares will expire.

“Actually we had written a letter to SEC reiterating a request for exemptive relief, because we’ve complied with our compliance plan on how to reduce it. But we have not received a reply,” PSE President and Chief Executive Officer Ramon S. Monzon told reporters after the listing ceremony of its P2.95-billion stock rights offering (SRO) in Taguig City yesterday.

Securing exemptive relief is a key requirement for PSE’s acquisition of PDSHC, as it would exempt the company from the 20% single industry cap on exchange ownership. Among SEC’s conditions for granting such exemption is for the PSE to bring down its broker ownership to less than 20%. So far, the bourse operator has been able to reduce ownership of trading participants to 21.38% after its SRO.

The PSE also weeded out earlier this month 14 inactive brokers who collectively owned 2.34% of the exchange. It now awaits the SEC’s decision on revoking the license of the inactive brokers.

Asked whether the equities bourse will seek an extension of the SPAs, Mr. Monzon said he was uncertain whether it is “the right thing to do.”

“We could if we wanted to, but we don’t think that’s the right thing to do. What is the extension for? What will change?” Mr. Monzon said.

PSE had signed an SPA with the Bankers Association of the Philippines; 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 Consultancy Services Asia-Pacific Pte. Ltd.

Amid the PSE’s efforts to acquire PDSHC, the Land Bank of the Philippines (LANDBANK) has also made a proposal to acquire a majority stake in the fixed-income exchange, saying that it is willing to offer a higher price than that of the PSE. LANDBANK President and Chief Executive Officer Alex V. Buenaventura said its board of directors has approved to acquire 66.67% of PDS at P360 per share, against PSE’s offer of P320 per share.

Mr. Monzon noted the PSE has no plans to engage in a bidding war with the government once LANDBANK makes an offer to PDSHC’s shareholders.

“Hindi naman bidding war ito eh. I don’t think we should be engaging the government in a bidding war. Di ba katawa-tawa naman tayo sa (Wouldn’t we look funny to the) international financial community that a private sector and the government are outbidding each other,” Mr. Monzon said.

Should LANDBANK pursue its plan to purchase majority of PDSHC, it would also have to secure exemptive relief from the SEC as well as approval from the Philippine Competition Commission.

The PSE has been negotiating to acquire a majority stake in PDSHC since 2013, in a bid to unify the country’s capital markets for operational synergies. Aside from signing an SPA with shareholders, it has also obtained PCC’s approval.

“We still want to unify but… look at the developments. Obviously, LANDBANK is pursuing it,” Mr. Monzon said.

“So, that’s not a unification, but of course they are entitled naman… It’s beyond our control.” — Arra B. Francia