Macquarie shoots down criticism of Meralco deal

By: Daxim L. Lucas
Philippine Daily Inquirer
2:56 am | Saturday, October 22nd, 2011


At least one foreign fund manager has taken notice of the ongoing probe of government financial institutions’ (GFIs) investment activities during the past administration, and seems worried by the direction it is headed in.
In particular, the local unit of Australian financial giant Macquarie Group noted that senators’ criticism of the sale of state banks and pension funds of their stakes in power distributor Manila Electric Co. was ill-advised.
“In our view, to conclude that, on hindsight, the GFIs lost money from the sale of their stake in Meralco would be unwise, nearly three years after these transactions were done,” Macquarie Capital Securities (Phils.) Inc. said in a research note to clients titled “Hindsight is always 20/20.”
In reality, the deal was so profitable that the GFIs involved booked a combined profit of P17 billion by selling their shares in Meralco, even as the global financial crisis that peaked in 2008 had wiped out over half the value of their other stock holdings, it pointed out.
The statement came after the Senate probe on the Development Bank of the Philippines’ (DBP) P660-million loan to Roberto Ongpin began shifting to the role of other state-run financial institutions played in the businessman’s investments in Meralco and petroleum refiner Petron Corp.
In particular, Sen. Sergio Osmeña III questioned why the GFIs sold their shares in Meralco at only P90 apiece, when the share price rose to as high as P300 per share several months later.
Critics of both the DBP loan to Ongpin and the more recent Meralco sale issue have adopted identical arguments—that GFIs could have booked bigger gains had they held on to their shares for a few more months.
Macquarie—which is also one of the largest stockbrokers and investment banking firms operating in the Philippines—pointed out that GFIs like the Government Service Insurance System (GSIS), Social Security System (SSS), Lank Bank of the Philippines and DBP, in fact, sold their Meralco shares at the peak of the sub-prime crisis in 2008, “a time when stock markets had collapsed and lost more than half of their value.”
“On further analysis, we believe the GFIs’ disposals proved to be beneficial to them,” Macquarie said.