Two years after ceding control of Manila Water Company (MWC) to billionaire Enrique K. Razon Jr., the Ayala Group is further reducing its stake in the water concessionaire by selling more shares to raise P5.7 billion as part of the Zobel conglomerate’s P50-billion fund raising activity.

In a disclosure to the Philippine Stock Exchange (PSE), Ayala Corporation said that it will sell 289 million MWC common shares, while wholly-owned subsidiary Philwater Holdings Company Inc. (Philwater) is selling 436.24 million MWC participating preferred shares, to MWC in a buyback transaction.

Once this transaction is completed, Ayala said it will retain an effective 23.5 percent voting stake and effective 22.5 percent economic stake in MWC.

As of MWC’s last public ownership report, Ayala still owned MWC common shares equivalent to a 30.06 percent stake while Razon had a 31.21 percent interest in the company. However, this does not include preferred shares and a previous agreement by Ayala to to cede voting rights to Razon.

“The sale is aligned with Ayala’s strategy to rationalize its portfolio and raise P50 billion in proceeds. The proceeds will be used to pare down debt and fund future investments,” Ayala said.

The shares of AC’s common shares in MWC will be done through regular block trade at the PSE while Philwater’s participating preferred shares in MWC will be sold directly to MWC.

For this transaction, Ayala said MWC common shares were priced at P17.1647 per share based on a 30-day volume-weighted average price as of October 10, 2023, less a 4 percent block discount, aligned with the standard deal structure of block sales.

On the other hand, the preferred shares were priced on a negotiated basis at P1.7165 per share, considering the participation features of such shares to dividends to common shares on a one-tenth basis.

In June 2021, Ayala formally ceded control over MWC to Razon following an agreement wherein the tycoon bought a 24.96 percent stake but was given voting power for 51 percent of the utility.

Manila Water had advised the PSE of the change in its controlling shareholder from the Ayala’s Philwater Holdings Company (PHC) to Razon’s Trident Water Company Holdings Inc.

On Feb. 1, 2020, Razon’s Prime Metroline Holdings, Inc. (now known as Prime Strategic Holdings Inc.), on behalf Trident, signed a subscription agreement with MWC for 820 million MWC common shares at P13 per share.

The subscription represented approximately 11.91 percent of the resulting total issued and outstanding capital stock of MWC and 24.96 percent of the economic rights in MWC.

The Subscription Agreement includes a grant by Philwater to Trident of proxy rights over a bloc of preferred shares in MWC to give Trident 51 percent voting interest in MWC.

In an amendment to the Subscription Agreement dated Feb. 15, 2021, the payment terms of the subscription was amended to 50 percent or P5.33 billion to be paid on Closing and the remaining 50 percent upon call by the board of directors of MWC.

Also last February, Trident agreed to buy 2.69 billion preferred shares in MWC from PHC for a total purchase price of P4.84 billion under a Share Purchase Agreement, payable over five years.

The purchase of the 2.69 billion preferred shares, in addition to its subscription to 820 million common shares, gives Trident a total 51 percent voting interest in MWC.

Trident conducted a mandatory tender offer for 1.12 billion common shares of MWC, approximately 54.16 percent of the outstanding common shares, from all shareholders, excluding the 867 million common shares held by Ayala Corporation and its nominees and the 4 billion preferred shares held by Philwater.