Tuesday, February 25, 2014

Salim brought in zero funds to capture Meralco

Manila TImes.net
February 25, 2014 11:54 pm
Second of a series on the Salim Empire in the Philippines
ONE compelling economic justification for foreign investments is that a capital-deficient developing country like ours needs capital from abroad, which developed countries with capital-surpluses can provide.
This is not the case, though, in the accumulation of the controlling stocks in Manila Electric Co. by firms controlled by the Indonesian magnate Anthoni Salim.  It is a cautionary tale proving that the presence of foreign business does not necessarily entail capital inflows into the country.
According to publicly available data, Salim’s firms acquired what now makes up the 50 percent controlling stocks of   Meralco —now under the corporate vehicle Beacon Electric Assets Holdings— through the following two main avenues.
First, was a clever, but I would say questionable, scheme that involved the funds of the Beneficial Trust Fund of Philippine Long Distance Telephone Co., the giant telephone firm which Salim also got to control in 1998.
The Fund was used in 2009 to purchase 10 percent of Meralco shares —which made up, as it were, the Indonesian tycoon’s first beachhead in this capture of Meralco.
And second, domestic borrowings, both short- and long-term, from local banks totalling at least P30 billion, financed the rest of the purchase of the Meralco shares, collateralized by those very stocks.
In effect the savings of thousands of Filipinos, both small depositors and corporate investors. financed the acquisition by an Indonesian magnate of our biggest power firm.
PLDT Beneficial Trust Fund
PLDT’s Beneficial Trust Fund in February and March of 2009 had quietly bought Meralco shares totaling for 10 percent of its shares.  To this day, the cost to the Trust Fund of its purchases had not been disclosed, as the price during that period ranged from a low of P90 per share to a high of P123.
However, PLDT’s 2009 reports to the Philippines Securities and Exchange Commission as well as to its US counterpart, did not report the Fund’s purchases of  Meralco shares. The Fund had assets of over P20 billion at that time, accumulated through contributions both by the company and its staff, as required by various agreements with its labor unions and as part of its compensation scheme.
It is run by a board of trustees, which although theoretically independent, has been controlled by PLDT management, which is in turn is appointed by its controlling stockholders—since 1998, Salim’s firms.
The fund’s chairman when it bought the Meralco shares was now Foreign Secretary Albert del Rosario, who had been a board member of the PLDT ever since the Salim Empire got to control it in 1998.  He was also a director of First Pacific, Salim’s flagship for his Asian empire since 2003—even when he was Philippine Ambassador to the US from 2001 to 2006—until 2011, when he was appointed Foreign Affairs Secretary.
“Del Rosario is not MVP’s man, but Salim’s,” an investment banker explained. “He opened the doors in Manila’s business world for MVP, who then was an obscure investment banker in Hong Kong.”
“MVP” is Salim’s chief executive in Manila, the face of his empire here, who chairs most of the Indonesian magnate’s main companies here. “That’s how well connected the Salim Empire here has been,” the banker said.
One of Pangilinan’s top executives, Ray Espinosa, who has been vice chairman of the fund from that time until now, claimed then that the fund’s Meralco shares were merely portfolio investments it bought just like shares of other listed firms.
However, seven months later, in October 2009, Salim’s holding firm in the Philippines, Metro Pacific Investments, bought all of PLDT Beneficial Trust Fund’s Meralco shares, for a purchase price of P14.2 billion, or P126 per share.
But Metro Pacific didn’t pay the pension fund cash.
Metro Pacific swap
Payment was in the form of new shares in Salim’s flagship in the Philippines, Metro Pacific Investments Corp, which it issued and valued at P9.5 billion.  It cannot be determined how much the Fund gained or lost, since it had not disclosed how much it spent in buying the shares in the market early in October.
The Fund though got to turn those shares into cash only a year later, when it sold these in the stock market, in tranches in April and October for a total of P12.9 billion—lower than the P14.2 billion sale price of its Meralco shares.    source

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