By Chino S. Leyco
Finance Secretary Carlos G. Dominguez III said that LandBank of the Philippines will be aggressive in ensuring that the government will have a controlling stake in the Philippine Dealing System Holdings Corp. (PDS).
Dominguez, the ex-officio chairman of LandBank, admitted he was disappointed with how the Philippine Stock Exchange (PSE) ensures that the planned merger of the local bourse and the bond market is for the best interest of the public.
The finance official pointed out that the PSE has yet to lower broker ownership in the company to the 20 percent as required by the Securities and Exchange Commission (SEC).
“Around September of 2016, I told PSE to be compliant with the law with regard to the allocation of their share to groups of shareholders as a condition to SEC’s approval of their plan to acquire PDX,” Dominguez said in a mobile text message.
“As of now, 16 months later, they are not compliant,” he added. “The development of the capital market is being slowed down by the PSE’s inability to be compliant with the law.”
With PSE’s failure to comply with the corporate regulator’s order, Dominguez said that LandBank is willing to take control of PDS, noting “the Duterte administration will no longer tolerate private institutions thwarting the goal of achieving a robust and inclusive financial system.”
Dominguez said that LandBank will offer an “aggressive bid” to all existing shareholders of PDS to sell their stake to the state-owed bank, the country’s fourth largest lender in terms of assets.
“We will make a bid, we will make an aggressive bid, I think,” Dominguez told reporters when asked if LandBank can convince the PSE, along with other PDS shareholders to sell their stake in the company.
Since June last year, the PSE signed share purchase agreements with the shareholders of PDS, giving the company a majority stake of 61.03 percent in the holding firm.
Among the shareholders of PDS are the Bankers Association of the Philippines (BAP), Whistler Technologies Services, Investment House Association of the Philippines, and Philippine American Life and General Insurance Co.
Other stakeholders were FINEX Research and Development Foundation, San Miguel Corp. and Tata Consulting Services Asia-Pacific Pte. Ltd.
Dominguez said that LandBank asked his permission if they can proceed with the planned acquisition of PDS.
“I said if it’s a good business for you, yes. If it doesn’t make money for you, don’t do it. But they said they will make money from it. So, go ahead,” Dominguez said.
“LandBank has been doing something to increase its profit because the more money they made, the more dividends they give to the government,” he added.
Alex V. Buenaventura, LandBank president and chief executive has proposed to the lender’s board the acquisition a majority stake in PDS, the holding firm of the country’s fixed-income trading platform.
In a letter obtained by reporters, Buenaventura wanted to buy at least 66.67 percent shares of PDS.
“My January 16 letter to acquire at least 66.67 percent of PDS shares will be submitted to the LandBank Board for approval on January 23,” Buenaventura said in a mobile text message when asked for confirmation about the plan.
“The objectives are to increase LandBank profits and to accelerate development of capital markets in the country,” he added
The Philippines’ fourth largest bank in terms of assets currently owns only 1.56 percent of PDS through the BAP.
In order to facilitate the acquisition of PDS, Buenaventura requested from the LandBank board to tap another state-owned lender Development Bank of the Philippines (DBP) as the financial advisor for the transaction.
“The engagement of DBP is a vital preparatory act to initiate the acquisition process,” he said.
The Securities and Exchange Commission has approved last week the R3-billion stock rights offering of the PSE which will lead to the dilution of the stake of stock brokers in the bourse to below the 20 percent cap.
This is one of the requirements of the SEC for granting the PSE exemptive relief to allow it to merge with the PDS. Once exemptive relief is granted, the PSE’s share purchase agreements with some PDS shareholders will take effect, giving it a majority stake in PDS.