ABS-CBN Corporation (ABS-CBN) and TV5 Network, Inc. (TV5), Thursday (August 11) executed an Investment Agreement allowing ABS CBN to acquire 6,459,393 primary (new) common shares in TV5, representing 34.99 percent of its total voting and outstanding capital stock, for P2.16 billion.
After the consummation of the deal, the MediaQuest group’s equity in TV5 will be reduced to 64.79 of the voting and outstanding capital stock and the MediaQuest group will remain to be the controlling shareholder of TV5.
Simultaneously with the execution of the Investment Agreement, the parties will execute a Convertible Note Agreement
ABS-CBN will invest in a P1.84 billion Convertible Note to be issued by TV5.
The Convertible Note will allow ABS-CBN to acquire additional primary common shares of TV5 after 8 years from its issuance, increasing its equity in TV5 to no more than 49.92 percent of the outstanding capital stock of TV5.
The proceeds of the subscription in the primary common shares and the Convertible Note in the total amount of P4 billion will fund the capital expenditures and operating expenses of TV5 to enhance its content and programming and public service offerings.
This transaction is transformational for both companies and will significantly enhance TV5’s capability to deliver content and coverage in news, sports and public services.
This is also consistent with the national policy of expanding the private sector’s role of supporting efficient and reliable public services via increased nationwide coverage, especially in remote areas.
The transaction is expected to be completed within August 2022, and closing is subject to fulfillment of certain closing conditions.
“We welcome the entry and investment of ABS-CBN in TV5, as ABS-CBN has always been the leading developer and provider of Filipino-related entertainment content not only in the Philippines but overseas as well,” remarked Manuel V. Pangilinan, Chairman of Mediaquest Holdings.
For his part, Mark Lopez, Chairman ABS CBN stated “We are excited with this partnership as we see the opportunity to help TV5 grow and strengthen its free to air network. For ABS, it presents a fantastic platform for us to achieve synergies in production content and talent management as well as maximizing our content delivery.”
“This partnership is consistent with the strategic intention of ABS-CBN to evolve into a storytelling company whose goal is to reach as wide an audience as possible,” remarked Carlo Katigbak, President and CEO of ABS-CBN.
“In partnership with TV5, we look forward to reaching viewers both on owned platforms and through other broadcast partners, thereby enriching the Philippine creative industry,” he added.
“We hope the industry evolves from being highly competitive to increasingly collaborative, which benefits all stakeholders in the long run.”
The landmark deal comes after activities between the two groups have increased with more Kapamilya programs onboarded on TV5’s Kapatid Network.
AlphaPrimus Advisors and Picazo Buyco Tan Fider & Santos advised theMediaQuest group on this transaction while the law firms of Romulo Mabantaand Quiason Makalintal advised ABS-CBN.
Meantime, the Philippine Competition Commission (PCC) reiterated that it has not been consulted nor received any notification from both MediaQuest and ABS-CBN on their “investment agreement” as well as the “sale and purchase agreement” between Cignal Cable Corp. and Sky Cable Corp.
PCC OIC Chairperson Johannes R. Bernabe reminded the parties that transactions that meet the P50-billion thresholds set by the Bayanihan to Recover as One Act (Bayanihan 2) are required to be notified to the PCC for review to ensure that there is no harm to competition and detriment to consumer welfare.
With the lapse of the period set under Bayanihan 2 on Sept. 15, the PCC notification thresholds will revert to appropriately lower levels that reflect the relative size and performance of the economy.
While the PCC determines whether the thresholds under Bayanihan 2 have been met, it may also direct its Mergers and Acquisitions Office to conduct an initial assessment if the effects of the transactions involving TV5 and ABS-CBN, and Cignal and SkyCable, warrant a motu proprio review. A merger review will determine if the transaction may result in a substantial lessening of competition in the relevant markets.
The PCC’s mandate to review mergers and acquisitions is centered on protecting consumers from transactions that may result in unchecked market power. Mergers and acquisitions often mean less choices for consumers. Lack of competition may lead to higher prices or lower quality products and services, all to the disadvantage of consumers.
“The PCC has always been supportive of business expansion activities, especially in this post-pandemic period when the economy is rebuilding and recovering,” said Bernabe in a statement.
At the same time, he said, PCC wants to ensure that measures to help recover from the pandemic do not result in harm to the market in the long run.