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.