SEC studies business plan of PSE, PDS for unified exchange

The Securities and Exchange Commission (SEC) is studying the business plan of the Philippine Stock Exchange Inc. (PSE) and the Philippine Dealing Systems Holdings Corp. ( PDS) for a unified exchange.

The PSE operates the local bourse while PDS operates the Philippine Dealing Exchange Corp., the country’s secondary market platform. The two exchanges are moving to consolidate to offer additional value to issuers, investors, and other market participants at various levels.

In a press briefing yesterday, SEC chairperson Teresita Herbosa said the corporate regulator is making sure the planned merger would be beneficial to the investing public and would not result in a monopoly.

“There’s the issue of competition. We have a new competition law and we’re mindful of the unification of the two exchanges… they’re practically companies that might result in some dominance by a single entity,” Herbosa said.

She said the unification must bring about favorable results to the investing public by lessening the cost in investing in the capital markets.

The SEC wants to ensure that everything must be already in place, Herbosa said.

“One thing that we have to be very sure, some experts who have seen mergers in other parts of the globe, they told us that everything must be in place before the merger, consolidation and unification takes place. You cannot just give the license now and put conditions post requirements because it will be forgotten. We’ve taken the position that if you are going full steam ahead for the unification of our two exchanges, everything must already be in place even prior to the approval of SEC,” she explained.

The PSE is asking the corporate regulator for an exemptive relief to own more than 20 percent of an exchange.

Originally, the SEC had a self-imposed deadline to decide on the matter by end-October.

In the same briefing, SEC Markets and Securities Regulation Department Vicente Felizmenio Jr. said the SEC would continue to hold meetings with both the PSE and PDS officials.

“We are conscious of what they want,” he said.

Asked if the merger could be approved this year, Felizmenio said it was difficult to say for certain.

PSE president Hans Sicat said the merger would provide a more competitive landscape for the Philippine capital markets.

In July, the PSE signed a share purchase agreement (SPA) with the Bankers Association of the Philippines (BAP) covering the acquisition of BAP’s shareholdings in PDS.

The PSE and BAP earlier inked a term sheet in October 2014 where both parties agreed, among others, to the P2.25 billion full firm value of PDS. The SPA signed by the parties will lead to the transfer of ownership of BAP’s equity interest in PDS to PSE upon completion of conditions that include regulatory approvals from the SEC. During the annual stockholders’ meeting in May 2015, the shareholders of the Exchange approved the increase to at least two-thirds PSE’s shareholdings in PDS.

J. P. Morgan served as financial advisor to the PSE on the transaction.

PSE chairman Jose T. Pardo earlier said, “The support of the government, particularly the Department of Finance, the Bangko Sentral ng Pilipinas and the Securities and Exchange Commission, played a vital role in bringing forth this transaction. We continue to work with them to achieve our common goal of seeing a more robust Philippine capital markets.”