What's in an acronym? Quite a lot in the Philippines these days. Most of the recent headlines have been about the latest President, GMA (Gloria Macapagal-Arroyo). Now here comes another GMA - a privately held TV company that is being bought by telecom company PLDT.
PLDT has signed an MOU to buy a 66.67% stake in GMA from the existing shareholders. The acquisition will be made by Mediaquest - a wholly-owned subsidiary of PLDT. The acquisition is being supported by a consortium of financial investors who will remain anonymous until a definitive sale and purchase agreement is signed.
At present, it is understood that at least half the purchase amount will come from PLDT and its subsidiaries while the unnamed financial investors will contribute the remainder. These investors are likely to buy Philippine Depositary Receipts issued by Mediaquest over its shares in GMA.
The purchase price of the shares will be concluded after the due diligence process has been completed, a period of at least two months. However, PLDT has stated that GMA has an enterprise value of Ps14.5 billion ($298 million) with net debt of Ps2 billion. This, therefore, works out to be a purchase price of Ps8.5 billion for the two-thirds stake.
The acquisition comes at a time when PLDT, which is owned by Hong Kong conglomerate First Pacific and the dynamic Manny Pangilinan, is diversifying itself away from is core fixed line telephone business. The company already owns mobile phone franchises (Smart and Piltel) as well as a leading cable TV station (Home Cable Television) and a nationwide radio network of 30 stations (Nation Broadcasting Corporation).
The acquisition of GMA will bring ownership of Channel 7 - the second largest free-to-air TV channel in the country - as well as a further 42 radio stations. The benefits brought about by the deal are likely to be in terms of better overall coverage for advertisers across the whole company, as well as being able to transplant PLDT's financial acumen onto GMA.
The acquisition is an encouraging sign that investment is returning to the Philippines after the recent political hiatus. GMA is a privately held company that is owned by three families. They are selling their shares in proportion to their original holdings and retaining a 33% interest in the company.
ABN Amro is advising PLDT on the deal while GMA's shareholders are being advised by JP Morgan.
