September 14, 2017
INDEPENDENT directors of Energy
Development Corp. (EDC) described as “fair” the voluntary tender offer price of
P7.25 per share proposed by the local unit of a Dutch company to acquire around
31.7% of the Lopez-led renewable energy company.
EDC submitted to the stock exchange
a statement signed by its independent directors that cited a report of an
independent financial advisors and a separate fairness opinion report by
another entity.
“After carefully considering the
information available to the Board, including the information set out above, we
are of the view that the tender offer price of PREHC (Philippines Renewable
Energy Holdings Corp.) is fair,” said EDC independent directors Francisco Ed.
Lim, Edgar O. Chua and Manuel I. Ayala.
The statement, issued to EDC
shareholders, followed EDC’s disclosure on Aug. 3 that PREHC offered to buy
through a tender offer between 6.6 billion and 8.9 billion common shares of the
company.
PREHC is a wholly owned subsidiary
of Philippines Energy Markets B.V., a company organized under the laws of the
Netherlands.
The sale is expected to deliver
proceeds of around P14 billion to First Gen Corp., EDC’s parent firm which
entered in the agreement with the bidder.
EDC said the tender offer price
represents a 21.8% premium over the last closing share price of P5.95 per share
on Aug. 2. It is also 21.5% higher than the three-month and six-month volume
weighted average price of the company’s shares.
PREHC had engaged Punongbayan &
Araullo (P&A), an independent financial advisor and an affiliate of Grant
Thornton, to give a fairness opinion on EDC even though a fairness opinion is
required only for mandatory tender offers.
The advisor placed the range of
value of EDC’s common shares that is fair from a financial point of view at
between P5.97 and P7.11 per common share as of March 31, 2017. The tender
office price is above that range.
EDC said it had also hired BPI
Capital Corp. “to opine on the reasonableness” of the tender offer, the
methodologies and approaches used by P&A.
It said BPI Capital “has expressed
an opinion that… the various approaches and valuation methods applied by
P&A in determining the fair value of EDC are reasonably appropriate.” It
also said BPI Capital’s conclusion that “the computations carried out by
P&A in the various valuation methods… resulted in values that are
arithmetically correct.”
BPI Capital also said the P5.97 to
P7.11 per common share of EDC is fair and that the P7.25 per share offer price
offers a premium of 2% to 21% over P&A’s range of values.
Once complete, the deal will result
in EDC continuing to be controlled by First Gen, as it would retain a 60%
voting stake in the company.
“The tender offer provides First Gen
with an opportunity to realize part of its investment in the country’s largest
renewable energy company,” the holding firm previously said.
On Wednesday, shares in EDC closed 2
centavos or 0.29% up at P6.91 each, while those of First Gen added 32 centavos
or 1.8% to close at P18.12 each.
EDC also told shareholders that
PREHC will be owned and held by a consortium of investors comprising funds
managed by Macquarie Infrastructure Management (Asia) Pty Ltd. and Arran
Investments Pte Ltd., by up to 60% and 40%, respectively.
Red Vulcan Holdings Corp., a wholly
owned subsidiary of First Gen, will not participate in the tender offer and
will continue to hold the controlling interest in EDC.
First Gen and its wholly owned
subsidiary Northern Terracotta Power Corp. are entitled to, and will
participate in the tender offer. They will tender a total of 1,978,119,700
common shares held by them, which collectively amounts to 10.6% of EDC. —
Victor V. Saulon
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