An almost “done” deal for a controlling stake in “Kapuso” network GMA 7 by the group of businessman Manuel V. Pangilinan has collapsed over regulatory “risk-sharing” issues.
The Philippine Long Distance Telephone Co. (PLDT) group disclosed to the Philippine Stock Exchange yesterday that MediaQuest Holdings Inc., an investee company of PLDT Retirement Fund, had terminated recent discussions with GMA Network’s major shareholders.
Industry sources said the termination of talks had nothing to do with Pangilinan’s recent threat to move back to Hong Kong, noting that discussions had fizzled out even before that.
Knowing that the deal could encounter rough sailing among regulators, Pangilinan’s group was not willing to shell out the “advance” amount that would have guaranteed a windfall to the sellers at the buyer’s expense.
“The parties have been unable to arrive at mutually acceptable terms despite the continual discussions and efforts exerted in good faith,” PLDT said.
A separate disclosure from GMA 7 contained the same message.
Price, other issues
Pangilinan, who chairs PLDT, said in a statement that the termination of the initiative to acquire GMA 7 was not expected to adversely affect the PLDT group’s “strategy of evolving from a traditional telecommunications company into a multimedia service company.”
“The PLDT Group continues to believe that owning, producing and providing content across multiple platforms is an important component of its blueprint for growth and as such, intends to pursue its media strategy by building on MediaQuest’s current investments in TV5, the country’s third largest free-to-air television network by audience share, and Cignal TV, the leading provider of direct-to-home satellite television services,” he said.
GMA 7 chairman Felipe Gozon said that aside from the price, “there were other issues, commercial and legal, that we (GMA 7 and TV5) did not agree on. In good faith, we tried to resolve these issues, but we couldn’t. So, we decided to terminate the discussions.”
Gozon said GMA 7 remained “amicable and friendly” with the Pangilinan-led TV5. He said he could not divulge specific issues due to a confidentiality agreement.
Inquirer’s Biz Buzz reported in early September that after moving close to an acceptable pricing of P52.5 billion (enterprise value for 100 percent of GMA 7), the parties were stalled by the amount of advance payment that the would-be sellers had wanted Pangilinan’s group to lay on the table ahead of a congressional approval to consummate the deal.
“In the Gokongwei deal, both parties were willing to share the risk,” one source said.
The source was referring to PLDT’s acquisition of Digital Telecommunications from the Gokongwei group, which attracted concerns over “monopoly” because it resulted in a combined telecom market share of 70 percent.
After some delay, the deal was approved by regulators on the condition that PLDT would give up the 3G frequency of its unit Connectivity Unlimited Resource Enterprises.
GMA 7 shares tumble
Shares of PLDT gained 0.44 percent while those of GMA 7 tumbled 8.3 percent at the stock market on Thursday after it was announced that the talks had collapsed.
“If I were MVP, why will I put a big downpayment when it needs congressional approval?” said Wilson Sy, a director at Philequity Management Inc.
Alfred Dy, CLSA Philippines head of research, said walking away from the deal would “allow Pangilinan to focus on core businesses of PLDT and other growth opportunities.”
Dy said the acquisition would not have been cheap for Pangilinan’s First Pacific group, which he noted was also into other businesses like infrastructure and healthcare.
Other analysts said Pangilinan may not have been willing to shoulder all the regulatory risks in this initiative, especially when his hands were full with the mining pond tailing leakage at Philex Mining Corp.’s Padcal site in Benguet. Pangilinan also controls Philex, the country’s biggest gold producer. With a report from Bayani San Diego