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Analysis and Recommendation
GSIS acquires 12% of MPI in the midst of tender offer
State pension fund Government Service Insurance System (GSIS) has informed Metro Pacific Investments Corp. (MPI) and the Philippine Stock Exchange (PSE) that it has acquired an additional 2.5-Billion shares of MPI in the open market from August 23 to September 4. This brings the total holdings of GSIS to 3.4-Billion, which represents almost 12.0% of MPI.
GSIS informed the Exchange that it understands that its holdings are now considered as non-public as it exceeds 10% of the total outstanding shares. It further informed both the Exchange and MPI of its intention to remain a shareholder of MPI even after the company has delisted.
What does it mean for the tender offer and the voluntary delisting?
The tender offer was intended to allow the bidding consortium of First Pacific, GTCAP, Mitsui, and Chairman Pangilinan to buy out the remaining public shareholders and delist the company from the Exchange. While the original intention was to buy out everyone else and hand over sole control to the Bidders, GSIS refused to be bought out and instead bought a seat at the table.
Now that the GSIS shares are no longer considered as public float, MPI can still proceed with the delisting, provided that at least 6.8-Billion shares are tendered, which represents 95.0% of the remaining 25.0% public float after the GSIS acquisition.
GSIS says will not hinder delisting plan
The Government Service Insurance System (GSIS) guaranteed that it will not hinder MPI’s plan to delist despite owning 11.98% of the company’s common share. The acquisition of said shares enables GSIS to acquire one seat in the Board of Directors of the conglomerate.
What happens if the 95% threshold is not reached?
If the tendered shares only represent between 90-95% of public float, MPI will be suspended for failing to meet the 10% public float requirement and will eventually become involuntarily delisted. The Exchange also has the option to grant an exemption and allow the company’s request for voluntary delisting.
If the tendered shares represent between 80-90% of public float, MPI will suffer the same fate as FGEN and will be kicked off the PSE Index (to be replaced by BLOOM), but it will remain listed. The Bidders also has the option to reject the tendered shares. Note that PSE rules would prevent another tender offer from the same bidders for at least six months.
What to do now?
Unless one has enough funds to buy another board seat, the recommendation is still to accept the tender offer. We believe that in any scenario, this is as good as it can possibly get.
The biggest risk now is the scenario where the Bidders reject the tendered shares, which will immediately send the stock price plummeting to where it was before the tender offer was filed.
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