THE tender offer of shares in Pepsi-Cola Products Philippines, Inc. (PCPPI) in relation to its acquisition by Lotte Chilsung Beverage Co., Ltd. has been discontinued due to noncompliance with the Securities Regulation Code.
In a disclosure to the stock exchange yesterday, the listed soft drinks manufacturer said it has been notified by Lotte of the offer’s suspension as advised by the Securities and Exchange Commission (SEC).
Lotte’s letter, addressed to PCPPI and the Philippine Competition Commission, said the corporate regulator ordered it to cease the conduct of the tender offer “pending resolution of certain issues” and to allow shareholders that have tendered their shares to withdraw the same.
A statement by the SEC yesterday said its Markets and Securities Regulation Department (MSRD) made the decision after finding that there were issues in Lotte’s conduct of valuation and fairness opinion of PCPPI shares.
“Among others, the fairness opinion attached to the tender offer report filed by Lotte was issued by P&A Grant Thorton, which is currently providing bookkeeping services to two entities related to PCPPI,” it said.
“The MSRD finds that the business relationship of P&A Grant Thorton with the two entities, where PCPPI holds substantial shareholdings, could reasonably be perceived to undermine its independence to conduct and issue the fairness opinion,” it added.
Rule No. 19.2.6.1 of the Securities Regulation Code says “only independent firms…may conduct valuation and issue fairness opinion,” where independence is defined as “absence of any business interest or family relationship with any party to the transaction or of any of its directors, officers or major stockholders.”
Following the notice from the regulator on Tuesday, Lotte said its tender offer agent, First Metro Securities Brokerage Corp., had stopped the tender offer and abstained from accepting any shares from being tendered. PCPPI shareholders that have already tendered their shares and intend to withdraw may coordinate with the agent.
But it noted Lotte will push through with the tender offer and is “working with the SEC to clarify and resolve the concern raised.”
“Once this matter is resolved, (Lotte) will re-open acceptance of PCPPI shares to be tendered,” it added.
Lotte is a South Korean conglomerate which holds a controlling stake in PCPPI. It started the tender offer of PCPPI shares in December to increase its stake in the listed firm by buying up to 2,134,381,838 of its common shares at P1.95 each. This is equivalent to 57.78% of PCPPI’s total issued and outstanding capital stock as of end-September.
The offer is expected to lead to the delisting of PCPPI from the local bourse as it may result in a reduction of the company’s public float to below 10% — the minimum requirement by the SEC. But Lotte said it does not deliberately intend to delist PCPPI.
Shares in PCPPI at the stock exchange closed at P1.81 each after the announcement, down five centavos or 2.69% from Tuesday. — Denise A. Valdez
