THE SHAREHOLDERS Association of the Philippines (SharePHIL) is pushing for changes in rules covering tender offers amid controversies arising from the ongoing buyout of minority investors in Liberty Telecoms, Inc.
The organization will propose to The Philippine Stock Exchange, Inc. (PSE) changes particularly in the valuation process, its President Francis Ed. Lim told reporters after a general membership meeting in Makati City on Friday.
“That’s where, hopefully, we can help address the issues raised by minority shareholders because of recent events,” Mr. Lim said.
For instance, SharePhil wants the bourse to take the responsibility of hiring appraisers in order to ensure the credibility and independence of the fairness opinion required under the Securities Regulation Code (SRC).
“The appraisal company or the valuation company is hired by the issuer or the tender offeror and, in fact, their fees are paid by the tender offeror or issuer. Because of that, some shareholders are asking how they could be impartial,” Mr. Lim said.
“What SharePHIL is going to propose for the consideration of the PSE is perhaps it may be better if it is the PSE that will hire the third-party independent appraiser at the expense of the company,” Mr. Lim added.
In addition, SharePHIL will propose the adoption of the pricing method for mandatory tender offers under Sec. 19 of the SRC.
“The tender offer price for cases not covered by Sec. 19 should be the highest of three prices, for example, the highest of the price in the range of valuation, book value or general weighted average of the shares within a given period of time,” Mr. Lim said.
“In so far as voluntary delisting proceedings are concerned, all the [current] rules say is that there should be a fairness opinion,” Mr. Lim noted. “The complaint of minority shareholders is they feel offers are low even if there was a fairness opinion.”
The SEC and the PSE have existing methods of valuation, SharePHIL Chairperson Evelyn R. Singson told reporters during the same event.
“But as you know the valuation methods are really the results of the financial projections where assumptions are made. In most instances, the assumptions, of course, naturally must come from the company so the appraisers will either accept or maybe clarify some of those assumptions before they can come up with the valuation,” she added.
The proposed changes to the valuation process comes amid questions surrounding the voluntary tender offer of Vega Telecom, Inc. to the minority shareholders in Liberty Telecoms after its takeover by PLDT, Inc. and Globe Telecom, Inc. through a $1.5-billion transaction announced on May 30.
Vega Telecom is offering to acquire the remaining 165,883,221 common shares or 12.82% stake in Liberty Telecoms for P2.20 each. Minority investors have until Sept. 21 to accept the offer and exit the listed company.
Papa Securities, Inc. has questioned the pricing of the shareholding in Liberty Telecoms, which the brokerage earlier valued at P5.02 per share.
“This is under the assumption that the deal was primarily to gain control of the 700 megahertz spectrum via LIB,” Papa Securities noted in a tender offer analysis issued to clients on June 8.
The coveted assets, however, had been reassigned to associate Bell Telecommunications, Inc. since March last year. Yet, Liberty Telecoms made no mention of the transaction until releasing its latest quarterly report posted on the PSE Web site on Aug. 15, according to Papa Securities.
The Securities and Exchange Commission (SEC) has initiated an investigation into the non-disclosure of a transaction that effectively eroded the value of shareholding in Liberty Telecoms.
The regulator has received complaints from three groups in relation to the voluntary tender offer of Vega Telecom to other shareholders in Liberty Telecoms, its Markets and Securities Regulations Department (MSRD) Director Vicente Graciano P. Felizmenio, Jr. told reporters on Friday.
MSRD is currently in the fact-finding stage of the investigation, Mr. Felizmenio said, without disclosing any more details.
