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SMC Sells Meralco Shares to Gokongwei(2-min read)

SMC gives up its hold of 27% of Meralco (PSE: MER) ownership, to a willing buyer in JGS

Gokongwei is said to be a friendly ally of majority shareholder MVP-group given their history of transactions (e.g. PLDT previously buying Sun Cellular in exchange for JGS owning part of TEL, and some joint bidding ventures for PPP). 
At least friendlier than SMC that is.
SMC has been out for quite some time on its intention to sell its remaining ownership of MER, but did not name any potential buyer, not until now.

Analysts expect that this should remove the uncertainty with the stocks involved, particularly that of Meralco as for quite some time, the market was wait and see as to what happens to SMC’s share of MER, and at what price.

Need Cash?

SMC should benefit as well (assuming it sold at the right price) since this should provide them enhanced liquidity to finance expansion and meet obligations. SMC sold an initial tranche of its MER shares in July2013 to augment its debt obligations as it recently reported a net loss mainly due to foreign exchange losses (i.e. SMC has dollar denominated loans and given the recent peso depreciation from 40s to 43s, more pesos are needed to pay the same amount of dollars). Read Random Walker’s comprehensive article here.
How Much?
Rappler quoted PHP72B as the purchase price for 27.1% of MER. That translates to valuation of whole MER at only PHP265.6B or PHP235 per share.
Nonetheless, closing price of MER as of 01Oct is PHP295, up from PHP286 the day before. Still, if SMC sold at just PHP235 per share, that would give them substantial profits since they bought MER at PHP90/share in 2009. And if SMC indeed sold at PHP235, then JGS got a significant discount. What then does that say about current MER valuations?
And, a question previously asked by Random Walker, will PHP72B enough for their needs?
Let us see how this develops out in the coming days.

Read full articles here: Inquirer, Rappler
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