LAND BANK of the Philippines (Landbank or LBP) is conducting due diligence to acquire the majority stake of fixed-income exchange operator Philippine Dealing System Holdings Corp. (PDS).
In a statement, Landbank President and Chief Executive Officer Alex V. Buenaventura said he had a “fruitful” meeting with the Securities and Exchange Commission (SEC) to secure exemptive relief.
“The meeting was held five days after [Mr.] Buenaventura wrote to the SEC, requesting for a meeting to discuss the application process for seeking an exemption,” the statement sent to reporters on Tuesday read.
“Landbank is seeking exemptive relief from [section] 33.2 in the SRC (Securities Regulation Code). It refers only to the 20% ownership cap,” Mr. Buenaventura told BusinessWorld in a mobile phone message.
Under the section 33.2 (c) of the Securities Regulation Code, the government only permits a maximum of 20% industry ownership and 5% individual ownership of an exchange.
However, SEC is allowed to grant exemptions to industries and individuals to acquire more than the law permits, provided that the control “will not negatively impact on the exchange’s ability to effectively operate in the public interest.”
“With the Board approval, the only thing left to do is to finish our due diligence and report to the Board. […] Rest assured that we will comply with all applicable laws in acquiring PDS,” the statement added.
Last week, Landbank’s board of directors approved the acquisition of 66.67% stake of PDS, a week after Mr. Buenaventura proposed the move to Landbank’s board of directors.
Currently, Landbank owns 1.56% of PDS through the Bankers Association of the Philippines.
Meanwhile, Finance Secretary Carlos G. Dominguez, also the ex-officio chairman of the lender’s board, told reporters on Friday that Landbank needs profit to subsidize farmer loans.
“According to the evaluation of the LBP management, the PDS is a profitable organization, and LBP does need profits so that it can continue to subsidize farmer loans,” Mr. Dominguez said, adding that the acquisition will push the government’s plan to make capital markets inclusive.
“We would like to use the PDS to promote the use of bonds for medium industries to tap the capital markets. Right now, they only really have to go to banks to borrow,” he said.
The state-run lender seeks to acquire PDS amid the longstanding plan of the Philippine Stock Exchange (PSE) to merge the country’s equities and fixed-income markets.
In a disclosure on Monday, the PSE said its P3.16-billion stock rights offer was approved by SEC on Jan. 25.
This will be done after the country’s corporate regulator rejected PSE’s request for an exemptive relief in 2016.
PSE Chairman Jose T. Pardo said last week the SRO would bring down ownership of trading participants in the PSE to 19%. — Karl Angelo N. Vidal