Metro Pacific buys Philippines toll road

The Philippine conglomerate pays $278 million for a controlling interest in the country's longest toll road, the North Luzon Expressway.
Philippines conglomerate Metro Pacific Investments will buy a controlling interest in the countryÆs longest toll road, the North Luzon Expressway, for Ps12.2 billion ($278 million) in what will be the first toll road M&A in the Philippines.

The North Luzon Expressway is one of two major toll roads in the Philippines and the only one that is profitable, say sources close to the deal.

Metro Pacific will acquire First Philippine Holdings Infrastructure (FPHI), which owns a 67.1% stake in Manila North Tollways, the holder of the concession rights to the 83.7km expressway. FPHI also owns 46% of Tollways Management, which operates and manages the road.

Lopez group holding company First Philippine Holdings, and its parent company Benpres Holdings, own 50.05% and 48.08% of FPHI respectively, while the remaining 1.87% is held by public shareholders.

However, FPHI will acquire 1.71% of its outstanding shares which are currently held by the public before the deal closes so that First Philippine HoldingsÆ stake increases to 50.92% and that of Benpres to 48.92%. This will reduce the public shareholding in FPHI to 0.16%. Metro Pacific will make a tender offer to public shareholders in accordance with the Philippine takeover code.

Metro Pacific will pay Ps11.8 billion in cash for the initial 99.8% stake in FPHI and will also assume liabilities equal to Ps462.6 million. The tender offer to minority shareholders will be at a price of Ps2.467 per share and will total another Ps19.7 million. FPHIÆs share price has risen to Ps7 over the last few trading sessions as news of the deal leaked to the market and because liquidity is so thin that a few trades can push up prices.

First Philippine Holdings will effectively receive Ps6.2 billion and Benpres will receive Ps6 billion for their stakes in FPHI. First Philippine and Benpres are both advised by Macquarie Capital, while Metro Pacific does not have an adviser.

ôMacquarie is honoured to have been adviser to the first toll road M&A deal in the Philippines,ö says Macquarie managing director, Stephen CuUnjieng.

Aside from the North Luzon Expressway, Manila North Tollways also owns the concession rights for the 8.5 km Subic-Tipo Expressway, having won a contract to finance, design, construct, operate and maintain the two toll roads and facilities in June 1998. It also has the rights to build, operate and manage phase two of the North Luzon Expressway, which comprise 88.5 km of new road that will extend up to the Manila Port Area and is intended to decongest traffic.

Metro Pacific is a Manila-based investment management company focused on property and infrastructure in the Philippines. Its investment portfolio includes a majority stake in real estate developer Landco Pacific, known for its seaside residential resorts and weekend homes in Manila. In 2006, Metro Pacific and a joint venture partner won a bid for an 84% stake in Maynilad Water Services, the water, sanitation and sewage provider for a zone of Manila.

ôOur investment in FPHI is in keeping with our goal to consider carefully new investment opportunities, particularly in infrastructure, that will deliver recurring profits and strong cash flows,ö says Metro Pacific InvestmentsÆ president and CEO Jose Ma K Lim in a written statement.
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