PSE hopeful of SEC okay for PDEX merger

The Philippine Stock Exchange is planning to launch its R 2.7-billion stock rights offering in January next year with the aim of reducing stockbrokers’ stake in the bourse to below 20 percent as mandated by law.

PSE’s compliance with the 20 percent ownership cap is one of the conditions imposed by the Securities and Exchange Commission before allowing it to acquire PDS Holdings Corporation and its merger with the Philippine Dealing and Exchange Corporation, the country’s fixed income bourse.

With a clear plan to reduce brokers’ interest in the PSE, the exchange is hoping that the SEC will finally allow it to merge with the fixed income bourse by the first quarter of 2018, or even before the end of 2017.

PSE Chairman Jose Pardo explained that, while the SEC has secured the clearance of the Philippine Competition Commission for the merger, the SEC still has to grant the PSE exemptive relief from the rule that no single industry group can own more than 20 percent of an exchange.

Stock brokers still own more than 20 percent of the PSE years after it was demutualized.

Some brokers have been resisting suggestions for them to divest due to sentimental reasons while others point out that forcing them to sell will violate their ownership rights.

“We can only hope it happens during the first quarter of next year. I don't know if you will be more optimistic. I've tempered my optimism when it will finally happen,” said Pardo.

However, PSE President Ramon Monzon said “I always like to put myself out on a limb. I'd like to think it will happen before the end of the year. I hope it will happen before the end of the year.”

He explained that this is because the PSE is already taking concrete steps to reduce brokers’ ownership by selling new shares through a stock rights offering.

“We have filed a registration statement… the PSE will be issuing, through a stock rights offering, 11.5 million shares. The stock rights offering will not be open to the stockbrokers so that there will be a forced dilution of the stockbrokers,” said Monzon.

He noted that, “in our computation, with the 11.5 million shares that we will be offering, we believe that the final ownership of the brokers of the PSE will be a little less than 20 percent.”

“Since we have filed a registration statement with the SEC... there can be no doubt about the compliance plan. So, hopefully, it just involves a little more dialogue, a little more explanation and, if we are successful in doing that, before the end of the year, hopefully we can get the relief from the SEC,” said Monzon.

He estimated that it will take the SEC about a month to six weeks to review the PSE’s registration statement and the bourse and its underwriters are planning to start the book-building process by January and is looking at listing the new shares by February.