Asian titans clash over Salim's First Pacific deal

Asian titans clash over Salim's First Pacific deal

Elaine Kurtenbach, Associated Press, Hong Kong

An attempt by Indonesia's powerful Salim group to sell its
stake in troubled Philippine Long Distance Telephone Co. to
Philippine tycoon John Gokongwei has set off a managerial fracas
that stretches from Jakarta all the way to Tokyo.

Hong Kong-based and listed First Pacific Co., which is
controlled by the Salims, announced last week that it planned to
sell the company's 24.4 percent holding in PLDT, the Philippines'
largest phone carrier, to Gokongwei in a transaction worth US$925
million.

The deal would set up a joint venture to handle First
Pacific's stake in PLDT and a 50.4 percent stake in a Philippine
property developer, Bonifacio Land Corp. Gokongwei's group would
hold a two-thirds stake.

First Pacific's executive chairman, Manuel Pangilinan, a one-
time protege of the Salims, opposes the deal and is reportedly
attempting to pull together a counteroffer.

While conflicts between controlling shareholders and
management are common fare in Western boardrooms, they have been
relatively rare in the family-dominated Asian business world.

"In Western markets it is not at all unusual for the
management of a subsidiary to want to stage a buyout in those
circumstances. But management buyouts are quite unusual in Asia
because most companies are under family control," said David
Webb, editor of Webb-site.com, which provides independent
commentary on local business affairs.

The Salims recruited Pangilinan, a Wharton School-educated
Filipino, and put him in charge of building up First Pacific into
an international, Western-style investment empire back in the
1980s. But in recent years, the venture has been weighed down by
its unprofitable holdings in the Philippines.

Once Indonesia's largest conglomerate, the powerful Salim
group ceded more than 100 companies to the state after its Bank
Central Asia crashed in the Asian financial crisis of the late
1990s. Since then, the group has kept a low profile, though it is
widely thought to be using other companies to buy back its
assets.

As president and chief executive of PLDT, Pangilinan has been
trying to restructure the company as a mobile phone player. In
his bid to prevent Gokongwei from taking control, he has turned
for support to PLDT's chairman, Antonio Cojuangco, scion of a
rival Philippine business empire.

PLDT executives did not return phone calls Friday.

A First Pacific spokeswoman in Hong Kong, Sara Cheung, denied
that the deal with Gokongwei was in trouble and said further
discussions were planned for later in the month. Pangilinan's
position in the company remains unchanged, she said.

Still, First Pacific announced it was curtailing Pangilinan's
access to confidential information regarding the deal due to
"potential conflicts of interest."

Lively speculation in the Philippine media, as well as a
protest against Gokongwei's bid by several hundred PLDT workers
during the company's annual general meeting this week have helped
to dramatize Pangilinan's situation.

Ultimately, the deal between the Salims and Gokongwei can only
go through if yet another key player, Japanese telecoms giant
Nippon Telegraph and Telephone Corp., does not exercise its own
right to bid for PLDT as No. 2 shareholder, with a 15 percent
stake.

NTT president said Junichiro Miyazu told reporters in Tokyo
this week that his company was still undecided and was
considering "all possible options" regarding the proposed deal.

Pangilinan and Cojuangco would have to at least match
Gokongwei's bid - PLDT faces more than $1 billion in debt
obligations due from this year until 2004.

"Ultimately, Pangilinan is not a controlling shareholder. In
these situations, it's the controlling shareholder who wins,"
Webb said.