The Zobel-controlled Ayala Corporation is fully divesting from utility Manila Water Company with the sale of its remaining 23.6 percent stake in the Metro Manila East Zone concessionaire for P14.5 billion to billionaire Enrique K. Razon Jr.’s Trident Water Company Holdings Inc.
In a disclosure to the Philippine Stock Exchange, Ayala said its executive committee has approved the sale by AC and its wholly-owned subsidiary Michigan Holdings Inc. of their 578 million MWC common shares through the execution with Trident of the underlying agreements for the special block sales.
Philwater Holdings Company, Inc., another wholly-owned subsidiary of AC, and Trident will also be executing a Deed of Absolute Sale for the sale of Philwater’s 872.49 million MWC preferred shares.
“The transactions are aligned with AC’s strategy to rationalize its portfolio and raise P50 billion in proceeds. With these transactions, the total proceeds raised from AC’s portfolio rationalization initiatives will be P51.5 billion. The proceeds will be used to pare down debt and/or fund future investments,” Ayala said.
Ayala’s previous divestments of stakes in Manila Water were also in favor of Razon. It also gave the tycoon control over the utility through proxy agreements.
The gross consideration for these transactions among AC, Michigan, and Philwater, and Trident will be P14.5 billion consisting of P12.9 billion for the common shares and P1.6 billion for the preferred shares.
This translates to a purchase price of P22.361 per share based on a 30-day volume-weighted average price as of May 16, 2024, less a 7.2 percent block discount while the preferred shares were priced on a negotiated basis at P1.844 per share.
Trident will make a cash payment through crossing broker of P12.9 billion (before taxes and friction costs) for the common shares while there will be installment payments of P1.6 billion spread over 2024-2029 for the preferred shares.
Post-completion of these transactions, Ayala will no long hold common shares of MWC and its voting stake will be nil as a result of the block sale and voting proxy to be issued in favor of Trident vis-à-vis the participating preferred shares.
As part of the agreements, Philwater will execute of a proxy over its preferred shares in favor of Trident
However, Ayala will retain an effective 12.08 percent economic stake through the preferred shares which will be paid on an installment basis. Once the preferred shares have been fully paid for in 2029, Ayala’s economic stake in MWC will drop to zero.
As a result of the divestment, Messrs. Alberto M. de Larrazabal and Karl Kendrick T. Chua resigned as members of the MWC Board of Directors and the shareholders’ agreement among AC, Philwater, AC Energy and Infrastructure Corporation, and Trident was terminated.
In October 2023, the Ayala Group further reduced its stake in the water concessionaire to raise P5.7 billion. AC sold 289 million MWC common shares, while Philwater sold 436.24 million MWC participating preferred shares, to MWC in a buyback transaction.
In June 2021, the Ayala Group formally ceded control over MWC to Razon’s Trident following an agreement wherein the tycoon bought a 24.96 percent stake but was given voting power for 51 percent of the utility.
In February 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.
On February 15, 2021 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, gave Trident a total 51 percent voting interest in MWC.