The Philippine Stock Exchange, Inc. (PSE) is set to reshape the country's capital markets with its acquisition of a controlling stake in the Philippine Dealing System Holdings Corporation (PDS).
In a statement on Thursday, Dec. 26, the PSE announced that it had signed agreements to acquire a 61.92 percent stake in the PDS for P2.32 billion, further solidifying its position in the local capital market.
The acquisition will bring PSE's total ownership in PDS to 82.9 percent from existing 20.98 percent. The transaction, based on a P3.75 billion enterprise value of PDS, is priced at P600.00 per share.
“These signed agreements bring us a step closer to achieving our objective of consolidating the equities and fixed income exchanges and realizing the synergies and efficiencies from this unified setup,” Ramon S. Monzon, PSE president and chief executive officer, said.
“This will also allow us to be instrumental in the growth and development of the Philippine capital market with the introduction of new products for various stakeholders as well as the implementation of risk management processes,” he added.
The agreements include a term sheet with the Bankers Association of the Philippines (BAP) for 28.83 percent of PDS shares and share purchase agreements with five other shareholders.
They are Singapore Exchange Limited (20 percent stake), Whistler Technologies, Inc. (eight percent), San Miguel Corporation (four percent), Investment House Association of the Philippines (0.65 percent), and Golden Astra Capital, Inc. (0.36 percent).
Mizuho Bank Ltd. also signed a term sheet for its 0.08 percent stake.
The PDS is the holding company for the Philippine Dealing & Exchange Corporation, which operates the fixed-income exchange, and the Philippine Depository & Trust Corp., the depository for equities and fixed-income securities.
This acquisition marks a significant step towards unifying the local capital markets under a single entity.
Analysts said the PSE and PDS consolidation is expected to yield several benefits, including increased efficiency, improved liquidity, and enhanced global competitiveness.
By bringing together the equities and fixed-income markets, the PSE aims to create a more streamlined and accessible investment environment for both domestic and international investors.
The PSE's move to acquire PDS has been a long time in the making, with previous attempts dating back to 2013. However, regulatory hurdles and ownership limitations posed challenges to the merger.
In 2023, the Securities and Exchange Commission (SEC) reversed its earlier decision and granted the PSE exemptive relief from the ownership limit, paving the way for the current acquisition.
The transaction, however, is subject to customary closing conditions, including corporate approvals. Once finalized, the merger is expected to reshape the landscape of the Philippine capital market, potentially leading to lower transaction costs, improved price discovery, and greater access to business capital.