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PSE-PDS merger said on track

Posted on October 20, 2015

THE ESTABLISHMENT of a unified platform for the country’s equity and fixed-income exchanges is nearing completion, with the Securities and Exchange Commission (SEC) targeting to approve the merger of the two bourses this month.

“We are aware of our deadline -- self-imposed -- that we want to come up with [the approval] before the month is over,” SEC Chairperson Teresita J. Herbosa told reporters on the sidelines of a forum in Makati City yesterday.

“The matter before us is whether we will allow the transaction to go through already even if it will result in the PSE (Philippine Stock Exchange, Inc.) owning 100% of the PDS (Philippine Dealing System Holdings Corp.) and not in accordance with what the law provides.”

Section 33.2 of the Securities Regulation Code (SRC) prevents an industry or business group from owning or controlling, directly or indirectly, more than 20% of the voting rights of the exchange.

The bourse is poised to control as much as 95% of the PDS once it secures SEC approval, PSE President and Chief Executive Officer Hans B. Sicat said earlier this month.

The PSE had inked share purchase agreements with the minority shareholders of the PDS, with SEC’s green light being the last condition that would facilitate the transfer of their stakes, Mr. Sicat had said.

Hanging over the planned merger is an anti-monopoly suit filed before the Supreme Court by former legislators Aquilino Q. Pimentel, Jr. and Luis R. Villafuerte, Sr., former Budget Secretary Benjamin E. Diokno and former national treasurers Caridad R. Valdehuesa and Norma L. Lasala.

Asked to comment on the issue of monopoly, Mr. Sicat had said: “Even if we get the PDS, there is no legal block for anyone to come in to the exchange to operate the business except we know it will take lots of capital.”

The PDS is the holding company that owns the Philippine Dealing Exchange Corp., the operator of the fixed income exchange. It also owns the Philippine Depository and Trust Corp. which serves as the depository for equities and fixed-income securities.

In July, the PSE signed a deal to acquire the Bankers Association of the Philippines’ (BAP) 28.91% stake in PDS, reflective of its total enterprise value of P2.25 billion.

That deal with BAP made the PSE the single biggest shareholder of the PDS with a 49.89% interest.

Other stockholders are Singapore Exchange (20%), Computershare Technology Services (8%); Tata Consultancy Services Asia (8%); The Philippine American Life and General Insurance Co. (4%); San Miguel Corp. (4%); Financial Executive Institute of the Philippines (3.1%); Social Security System (1.5%); Investment House Association of the Philippines (1.1%); and Golden Astra Capital (0.4%).

Merger talks between the PSE and PDS started in May 2013, with completion originally targeted by the end of that year. The merger is expected to help the Philippines meet requirements for a cross-border trading platform linking Southeast Asian stock markets in time for the region’s formal economic integration next year. -- Krista Angela M. Montealegre