Millennium Global backs out of deal to buy stake in Calata

MILLENNIUM Global Holdings, Inc. (MGHI) on Tuesday said it will no longer acquire a majority stake in Calata Corp., which is undergoing “involuntary delisting” proceedings at the stock exchange.

In a disclosure to the stock exchange on Tuesday, MGHI said its board of directors has decided not to push through with the acquisition of 81%, or a total of 2.5 billion shares, in the agribusiness firm.

“It has been decided with finality that the company will no longer proceed with its planned acquisition of 81% of listed company Calata Corporation. The company shall instead tap its other business opportunities and areas of growth to fortify its business within the country and abroad,” MGHI said.

Sought for comment, Calata President and Chief Executive Officer Joseph H. Calata said they are looking for other options that would be fair to both the company and its shareholders.

“The company remains committed in continuously finding a win-win solution that will be fair to both the company and its shareholders. Hopefully, the Philippine Stock Exchange (will) continue to support this objective,” Mr. Calata said in a text message yesterday.

In August, MGHI struck a deal with Calata for the purpose of using the latter for the purchase of its subsidiary, seafood and aquaculture products trader Millennium Ocean Star Corp. MGHI was slated to increase its authorized capital stock by up to P10 billion to fund the acquisition.

Calata will then spin off its assets and liabilities to Agriphil Corp. and a private firm after the transaction.

In a separate interview earlier this month, PSE President and Chief Executive Officer Ramon S. Monzon said this transfer of assets is “impossible,” as this would result to chain listing, an activity that violates the bourse’s rules.

Under the PSE’s chain listing rule, a subsidiary or a parent firm of an existing listed issuer is not allowed to list if the assets and operations of the applicant are substantially the same as those of the existing listed issuer.

The PSE initiated involuntary delisting proceedings for Calata last July for committing 29 violations of disclosure rules under Section 13.1 of the PSE Disclosure Rules, as well as 26 violations of Section 13.2 of the same rules.

Calata was also found to have violated the so-called blackout rule, which prohibits directors and principal officers who have obtained material non-public information to trade their company’s shares within a prescribed period.

To avoid delisting, the PSE proposed that Calata launch a tender offer, and then buy back the shares of minority shareholders, or 70% of the company.

In a response to shareholders, however, Calata said this option would effectively kill the company, as the tender offer could reach P1 billion based on a price of P3 per share. This far outweighs Calata’s retained earnings of P400 million.

“There is no assurance that there will be cash left after all the creditor banks have been paid. Bottom line, in this scenario, the shareholders may not even be paid after all,” Calata said in a letter to shareholders last Oct. 17.

The PSE looks to come up with the decision on Calata’s delisting this week. —