PHILIPPINE billionaire Enrique K. Razon, Jr. will buy a 25% stake in Ayala Corp. unit Manila Water Co., Inc. amid a government review of allegedly onerous water contracts.
The water utility had agreed to sell 820 million common shares at P13 each to Mr. Razon’s infrastructure company Prime Metroline Holdings, Inc., Manila Water said in a stock exchange filing on Monday.
This raises P10.7 billion in additional equity capital that Manila Water would use to “pursue its long-term strategic initiatives,” it said.
Manila Water shares jumped to as high as P14.60 each before closing 4.93% or 60 centavos higher at P12.76.
“Our partnership with the Razon group will result in clear synergies to achieve Manila Water’s long-term goal of providing sustainable water and wastewater services,” Manila Water Chairman Fernando Zobel de Ayala said in the statement.
“Looking beyond our domestic businesses, the extensive global experience of Mr. Razon through his port operations opens more opportunities for Manila Water to serve new markets.”
The deal comes after President Rodrigo R. Duterte ordered government lawyers to review what he called were onerous contracts with the capital’s two major water providers.
Before yesterday’s announcement, Manila Water shares had fallen to a 30-day low of P5.01 each.
Under the subscription agreement, Ayala Corp. will remain the biggest shareholder of the water utility with a 38.6% stake.
Mr. Razon will set up a new company — Trident Water — for the transaction, Ayala Corp. said in a separate statement.
“The partnership with Trident Water, which demonstrates Ayala’s ability to attract sizable and long-term investments into the business group, adds enormous value to Manila Water as it executes on its long-term strategic direction,” it said.
“We are excited to enter into this partnership,” Mr. Razon said in the statement. “We will dedicate our efforts to further develop this unique business both here in the Philippines and abroad.”
The entry of Mr. Razon, who is seen as a Duterte ally, is a “good move” because it could ease government attacks on the water company, Diversified Securities, Inc. stock trader Aniceto K. Pangan said in a mobile phone message.
“This is a good move by Ayala Corp. as Razon is allied with the government,” he said in a text message.
Mr. Pangan said the government’s crackdown on big business is dissuading investors because it “undermines the stability of the contract.”
Mr. Duterte’s attacks have political, economic and social implications and stretches far beyond business, said Marlon M. Villarin, a political science professor at the University of Santo Tomas.
“The President really wants to make a clear statement that his administration does not owe these traditional oligarchs anything,” he said by telephone.
“He wants to sell this narrative that his administration is always for the interest of the people,” Mr. Villarin said. “That’s why he keeps on saying he doesn’t care whoever gets hit.”
While Mr. Duterte’s attacks may affect direct investors, the international community may see these positively, he said.
“Foreign direct investors may see that the government really means business when it comes to responsible corporate investment,” he said. — Denise A. Valdez