THE Philippine Competition Commission (PCC) has approved Trident Water Holdings Co., Inc.’s acquisition of the controlling stake in Manila Water Co., Inc., capturing 51% voting interest in the Ayala-led company.
Trident Water will be acquiring the controlling stake after a subscription of 820 million common shares of stock from Manila Water’s unissued capital stock, the PCC said in a press release on Tuesday.
Trident Water is a subsidiary of Prime Metroline Infrastructure Holdings, Inc. (Prime Infra), a holding firm led by businessman Enrique K. Razon, Jr.
Manila Water’s subsidiary, Philwater Holdings Co., Inc. will also grant proxy in favor of Trident Water over the seller’s preferred shares.
The PCC said that the transaction would not likely lead to a substantial lessening of competition in the market of the supply of water to the east zone concession area.
As the sole water distributor in the area, Manila Water has a captive customer base and no downstream competitors, PCC said.
“As waterworks is a form of ‘natural monopoly’ allowed by law through regulation, East Zone concessionaire Manila Water is subject to the extensive oversight and regulation by the MWSS (Metropolitan Waterworks and Sewerage System) in operating within 23 areas,” the PCC added.
The PCC’s mergers and acquisitions office found that the merged entity will not have incentive or ability to engage in customer or input foreclosure in the market for raw water in the area.
While the review found that there is a vertical relationship between the parties’ notifying group within the water sector before the transaction, PCC said customer or input foreclosure is unlikely “given that the arrangement is meant to service the East Zone even beyond the lifetime of Manila Water’s concession.”
Such foreclosure is unlikely, the PCC said, because operations are highly regulated.
In a disclosure to the stock exchange in March, Manila Water said Prime Infra would own 28% of the firm after its acquisition of 820 million shares priced at P13 each. At the time, Trident Water was yet to be incorporated.
The acquisition will reduce Ayala Corp.’s ownership in Manila Water to 30% from 41%. Public ownership in turn will be reduced to 41% from 58%, while foreign ownership will decline to 9.18% from 10.41%.
Prime Infra is involved in hotels, casinos, mining, infrastructure, power generation and distribution, and port services.
The PCC approval comes after Manila Water disclosed on Monday that it had received regulatory approval to increase its authorized capital stock to P4.4 billion after amendments to its articles of incorporation were cleared by the Securities and Exchange Commission (SEC).
The water provider also said the SEC approved to increase its carved-out shares to 900 million unissued common shares, which are reserved for cash, properties, or assets to carry out its business as approved by the company’s board of directors.
On Tuesday, shares in Manila Water slipped by 2.07% to close at P13.22 each. — Jenina P. Ibañez