Something Fishy in the Sale by GSIS of Meralco Shares to San Miguel

It must have been gratifying for the Lopezes to see GSIS head honcho Winston Garcia retreat with his tail between his legs.

Garcia, after all the sound and fury generated by the GSIS bid to take over Meralco, which led to all sorts of mischief and even dragged the judiciary down, sheepishly explained to the press that the government pension fund decided to sell out after all. The GSIS has entered into an agreement with San Miguel Coproration for the sale of the former’s 27% stake in Meralco for around P30 billion. SMC agreed to pay P90 per share for Meralco, more than double the utility company’s closing price of P44.50 at the start of the week.

Which is very odd indeed.

In a bear market, with stock prices tanking, why would SMC pay more than a 100% premium for a stake in Meralco ? Granted that it’s a block sale, but still, San Miguel could have gotten a better deal, and helped the stock market index rise, by buying over the counter. It would have given the market, and the economy as a whole, a boost at a time when it most needs it.

Many are skeptical, and see a political and financial motive behind the sudden sellout by the GSIS.

Albay governor Joey Salceda, a savvy market analyst and one of President Arroyo’s most trusted economic advisers (and who is confident enough to call her a “bitch“) , was surpised:

Something is not right with the picture. The price is bizarre. Such moves in the middle of a market meltdown would only heighten suspicions rather tha assure. Smells like a pre-nuptial deal.

Indeed, many believe San Miguel was convinced or coerced, whichever, to play the role of white knight. SMC essentailly saved Meralco from the continuing take-over threats of Garcia. Malacanang appeared to have been a key player, as Garcia, one of GMA’s most rabid attack dogs, backed down immediately, although with his usual bluster. But the shotgun wedding of San Miguel and Meralco is a done deal.

The Lopezes need all the help they can get at the moment. In a two-part article in BusinessWorld (October 22 and 23 issues) Bernardo V. Lopez (no relation, I suppose) chronicled the travails of the teetering Lopez empire, which he predicts will go the way of Lehman Brothers due to over-borrowing and its foreign partners saying adieu. The Lopezes have been selling their businesses, even the more profitable ones, like the Northern Luzon Expressway (NLEX) concession bought by Manny Pangilinan’s Metro Pacific, to raise cash. The family is not willing to hand over its crown jewel, Meralco, to the grubby paws of Mr. Garcia. Hence, the need to hop into bed with SMC and Danding Cojuangco. Somewhere along the way, it’s entirely conceivable that a few people in high places made a tidy sum brokering the deal. At the same time, the Lopezes now owe some people who might call in their chips any time they need the backing of the family’s formidable ABS-CBN media empire.

With the Filipino consumer, as usual, sold down the river. Now we not only have to pay San Miguel for the beer but also for the electricity to keep it cold.

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