Government expects P55B from sale of remaining SMC, Meralco shares

By Des Ferriols
The Philippine Star 04/24/2007

The government is expecting to generate at least P55 billion from the sale of its remaining shares in San Miguel Corp. (SMC) and Manila Electric Co. (Meralco) that officials said could be completed within the year.

As revenue collections fell short of the first quarter target, government finance officials said they hoped to wrap up on going negotiations with businessman Eduardo "Danding" Cojuangco Jr. for the sale of government-sequestered shares in SMC.

Finance Secretary Margarito B. Teves declined to give details of the on going talks with Cojuangco and different farmers groups who claim ownership of the shares sequestered by the government but said the talks were "closer than ever to a compromise agreement."

From the sale of the government’s shares in SMC, Teves said the government made a "very rough preliminary estimate" that it could generate at least P50 billion while the sale of the Meralco shares are projected to generate P5 billion.

Government shares in Meralco are intended to be sold as a single block possibly in the second half of the year and talks have been started with other government agencies that own part of the Lopez-controlled power distributor.

All told, the government owned 29 percent of Meralco with the National Government holding seven percent through the Privatization Management Office (PMO).

The rest is owned by the Social Security System, the Government Service Insurance System (GSIS) and the Land Bank of the Philippines (Landbank)—all state-owned corporations.

"We would have to find out and settle whether the GFIs also would like to sell their shares with us," Teves said. "Other things being equal, that would help improve the value of the government’s Meralco shares than if they were sold separately."

According to Teves, unloading the shares of government in Meralco would make the privatization even more attractive particularly to huge investors.

Teves said talks with the GFIs have not started but he intends to begin individual discussions to determine the possibility of selling the shares as a block instead of separately.

"I want to find out what their thoughts are about selling the shares as a block," Teves said. "It is possible that some of them might want to defer disposing of the shares instead of selling."

Teves said, however, that the sale of the shares would go through the usual bidding process to maximize the value of the asset. "That’s why we would prefer to sell the entire thing as a single block," he said. "It would make better business sense that way."

At stake are over 212 million shares equivalent to a 12-percent stake in Meralco.

The government holds a 29-percent stake in Meralco while the Lopez group’s First Philippine Holdings Corp. owns 14 percent. Spanish power firm Union Fenosa has a nine-percent stake, while the remaining shares are held by the public and other investors.

 

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