Dominguez backs Landbank move to acquire controlling stake in PDS
FINANCE SECRETARY Carlos G. Dominguez III is backing the move of the Land Bank of the Philippines (Landbank) to acquire the majority stake in the country’s fixed-income exchange, saying that the local stock market operator has taken too much time for the buyout.
Mr. Dominguez said he is keen on getting Landbank to own a majority stake at Philippine Dealing System Holdings Corp. ( PDS), saying that five years is too long a time for the Philippine Stock Exchange ( PSE) to carry out the acquisition, to the detriment of long- overdue capital market reforms.
“It has been five years,” the Cabinet official told reporters recently. “They (PSE) promised me then end of February, now it’s March. I’m afraid to meet them because it might be postponed again.”
“It’s very important for us... We want to develop this market — it’s not going to get developed when every time we talk to people who wants to buy it, they postpone it, so we might as well do it ourselves.”
The Landbank board approved on Jan. 23 the acquisition of at least 66.67% common shares of PDS, subject to a final offer price and timetable.
Currently, Landbank owns 1.56% of PDS through the Bankers Association of the Philippines (BAP).
The state-run bank is pursuing the buyout parallel to PSE’s own steps which started in 2013, as it eyes to merge the country’s equities and fixed income bourses. Since June last year, the PSE has signed share purchase agreements with the BAP; Whistler Technologies Services, Inc.; Investment House Association of the Philippines; The Philippine American Life and General Insurance Co.; FINEX Research and Development Foundation, Inc.; San Miguel Corp. and Tata Consulting Services Asia-Pacific Pte. Ltd., giving the PSE a 61.03% total stake in PDS.
The Philippine Competition Commission approved the agreements in November.
The Securities and Exchange Commission ( SEC) initially rejected the PSE- PDS merger in 2016 after denying the local bourse’s request to be exempted from an ownership cap. Under the section 33.2 (c) of the Securities Regulation Code, the government only permits a maximum of 20% industry ownership and 5% individual ownership of an exchange.
However, SEC is allowed to grant exemptions to industries and individuals to acquire more than the law permits, provided that the control “will not negatively impact on the exchange’s ability to effectively operate in the public interest.”
Landbank is requesting a similar exemption, bank president and chief executive officer Alex V. Buenaventura has said.
Mr. Dominguez said the acquisition of PDS will “certainly move the capital market ahead,” aligned with a government-wide strategy unveiled in August 2017.
The Bangko Sentral ng Pilipinas, Bureau of the Treasury, the Department of Finance, and the SEC rolled out an 18-month road map meant to deepen the local debt market, with the goal of providing an alternative source of financing for corporates, especially for long-term borrowing for big-ticket infrastructure projects.
“We are forced to do this... It’s not a priority for us but if the private sector cannot do it and we see the need for the improvement in the capital market, we will do it,” Mr. Dominguez added.