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EDC independent directors describe tender offer price as ‘fair’

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INDEPENDENT directors of Energy Development Corp. (EDC) described as “fair” the voluntary tender offer price of P7.25 per share proposed by the local unit of a Dutch company to acquire around 31.7% of the Lopez-led renewable energy company.

EDC submitted to the stock exchange a statement signed by its independent directors that cited a report of an independent financial advisors and a separate fairness opinion report by another entity.

“After carefully considering the information available to the Board, including the information set out above, we are of the view that the tender offer price of PREHC (Philippines Renewable Energy Holdings Corp.) is fair,” said EDC independent directors Francisco Ed. Lim, Edgar O. Chua and Manuel I. Ayala.

The statement, issued to EDC shareholders, followed EDC’s disclosure on Aug. 3 that PREHC offered to buy through a tender offer between 6.6 billion and 8.9 billion common shares of the company.

PREHC is a wholly owned subsidiary of Philippines Energy Markets B.V., a company organized under the laws of the Netherlands.

The sale is expected to deliver proceeds of around P14 billion to First Gen Corp., EDC’s parent firm which entered in the agreement with the bidder.

EDC said the tender offer price represents a 21.8% premium over the last closing share price of P5.95 per share on Aug. 2. It is also 21.5% higher than the three-month and six-month volume weighted average price of the company’s shares.

PREHC had engaged Punongbayan & Araullo (P&A), an independent financial advisor and an affiliate of Grant Thornton, to give a fairness opinion on EDC even though a fairness opinion is required only for mandatory tender offers.

The advisor placed the range of value of EDC’s common shares that is fair from a financial point of view at between P5.97 and P7.11 per common share as of March 31, 2017. The tender office price is above that range.

EDC said it had also hired BPI Capital Corp. “to opine on the reasonableness” of the tender offer, the methodologies and approaches used by P&A.

It said BPI Capital “has expressed an opinion that… the various approaches and valuation methods applied by P&A in determining the fair value of EDC are reasonably appropriate.” It also said BPI Capital’s conclusion that “the computations carried out by P&A in the various valuation methods… resulted in values that are arithmetically correct.”

BPI Capital also said the P5.97 to P7.11 per common share of EDC is fair and that the P7.25 per share offer price offers a premium of 2% to 21% over P&A’s range of values.

Once complete, the deal will result in EDC continuing to be controlled by First Gen, as it would retain a 60% voting stake in the company.

“The tender offer provides First Gen with an opportunity to realize part of its investment in the country’s largest renewable energy company,” the holding firm previously said.

On Wednesday, shares in EDC closed 2 centavos or 0.29% up at P6.91 each, while those of First Gen added 32 centavos or 1.8% to close at P18.12 each.

EDC also told shareholders that PREHC will be owned and held by a consortium of investors comprising funds managed by Macquarie Infrastructure Management (Asia) Pty Ltd. and Arran Investments Pte Ltd., by up to 60% and 40%, respectively.

Red Vulcan Holdings Corp., a wholly owned subsidiary of First Gen, will not participate in the tender offer and will continue to hold the controlling interest in EDC.

First Gen and its wholly owned subsidiary Northern Terracotta Power Corp. are entitled to, and will participate in the tender offer. They will tender a total of 1,978,119,700 common shares held by them, which collectively amounts to 10.6% of EDC. — Victor V. Saulon

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