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PSE deems EKR’s purchase of Ayala’s shares a ‘backdoor listing’, suspends MWC trading

The Philippine Stock Exchange suspended trading of Manila Water Co. on 18 February 2020.

The PSE said it deemed bilyonaryo Ricky Razon’s additional purchase of Ayala a “backdoor listing” which required more detailed disclosure.

The PSE declared the suspension a day after Ayala Corp’s Philwater Holdings Co. board agreed to sell more shares and cede more voting rights to Razon’s Trident Water on top of what the Ayalas and Razon agreed a year ago. The PSE halted MWC’s trading on February 15.

“After a review of the Company’s submissions, the Exchange deems that the foregoing transactions are covered by the exchange’s Rules on Backdoor Listing,” said the PSE.

PSE said the additional investment by Razon in the Ayala-controlled water utility would lead to a “substantial change in the voting structure of MWC upon completion of the transactions.”

Philwater has agreed to sell 2.691 billion preferred shares in MWC to Trident for P4.84 billion or P1.80 per share.

Razon would pay this purchase in tranches: P100 million of this amount was payable on or before three business days from signing, P2.37 billion payable on or before four years from the execution of the Share Purchase Agreement, the remaining balance of P2.37 billion payable on or before 5 years from the execution of the Share Purchase Agreement.

This additional purchase would increase Trident’s voting rights to 51 percent and 33.16 percent economic interest in MWC and leave Ayala Corp. and Philwater with a combined 31.6 percent voting interest and 30.37 equity interest in MWC.

In the February 2020 agreement, in which Razon agreed to buy 820 million common shares from the Ayalas, Trident only has 11.91 percent voting rights and 24.96 percent economic interest in MWC.

The Ayalas argued that Razon’s takeover has yet to be consummated pending approval from the Securities and Exchange Commission.

The rights and title to the shares, except voting rights covered by the proxies, would not be transferred until Razon had fully paid his acquisitions.

Dividends earned by the preferred shares shall continue to be for the account of Philwater until full payment has been made.

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