The Philippine Stock Exchange (PSE) has officially backed out of the race to take over the Philippine Dealing System Holdings (PDS Group), dashing hopes for the unification of the country’s capital market infrastructure.
As the timetable to close purchase agreements with key PDS shareholders lapsed on March 31, the PSE wrote to the counter-parties officially advising them that they would no longer seek an extension of the agreements, sources privy to the transaction told the Philippine Daily Inquirer.
This was after a board meeting was called to decide on the course of action for PDS, in which the majority decided to allow the purchase agreements to lapse.
“We divided the house and the majority decided not to pursue it,” one source said.
This now gives parties like the Bankers Association of the Philippines (BAP) leeway to evaluate other options for PDS or even to enter into new negotiations with the state-owned Land Bank of the Philippines, which had challenged the PSE’s takeover bid with the apparent backing of the Department of Finance.
Before this development, the PSE had obtained commitment from various shareholders of PDS to sell shares that would allow the former to boost its stake in PDS to 72 percent.
“The PSE is content to be a 20-percent shareholder of PDS,” the source said, adding that the bourse might even eventually consider selling its stake to Landbank depending on the terms of the buyout offer.
To gain ownership and control of PDS, the PSE would have to comply with the ownership limitations imposed by the Securities Regulation Code. Since first hatching the PDS takeover bid, the SEC lamented that the PSE remained non-compliant with the 20-percent industry ownership limit.
Recently, the PSE completed a P2.9-billion stock rights offering, diluting brokers’ ownership and raising funds for the PDS buyout. At the end of the offering, however, the SEC noted that brokers’ ownership still exceeded the limit by 1.71 percentage.
The PSE had appealed to the SEC to exclude from the computation the shares held by dormant brokers whose trading rights had already been revoked.