BAP says selling PDS to PSE hinges on ‘right conditions’

THE Bankers Association of the Philippines (BAP) said it is open to selling the Philippine Dealing System Holdings Corp. (PDS Group) to the Philippine Stock Exchange (PSE) under the right conditions.

“We’re willing to sell at the right conditions,” BAP President Jose Teodoro K. Limcaoco told reporters on the sidelines of a media briefing last week.

“(The PSE) has given us a letter saying that they are interested, but there’s no price,” said Mr. Limcaoco, who is also the president and chief executive officer (CEO) of Ayala-led Bank of the Philippine Islands.

He noted that the BAP had engaged an adviser to assess the value of the potential sale to the PSE.

“That’s where we are. There is no result yet,” he said.

The PSE is eyeing the acquisition of up to 100% of the PDS, the operator of the Philippine Dealing & Exchange Corp. (PDEx), which caters to the fixed-income market, as part of merging the country’s capital market infrastructure.

The PSE has a 20.98% stake of the issued and outstanding capital stock of the PDS Group, while BAP members and institutions have a 21% stake.

Some of the other PDS shareholders include Singapore Exchange Ltd. (20% share), Whistler Technologies Services, Inc. (8% share), Tata Consultancy Services Asia (8% share), San Miguel Corp. (4% share), Financial Executives Institute of the Philippines Research and Development Foundation (3.08% share), and Social Security System (1.54% share).

PSE President and CEO Ramon S. Monzon said that the local bourse is hoping to finalize the planned takeover of PDS within the year.

He added that negotiations have not started because the power of attorney of the BAP has expired. The power of attorney allows BAP to decide on the merger on behalf of its member banks.

“I’m not sure if we’re waiting for a power of attorney,” Mr. Limcaoco said after being asked about the PSE’s recent statement.

He said that they want to understand the governance structure of the proposed merger.

“If we were to sell PDS, we wouldn’t understand how PDEx is governed. So we’re trying to understand how they are supposed to govern PDEx.”

In December last year, the Securities and Exchange Commission (SEC) approved the application of the PSE for exemptive relief, allowing it to exceed the mandatory ownership in PDS.

This move allows the PSE to exceed the mandatory limit of 20% on ownership and voting rights in an exchange, permitting it to own up to 100% of PDS, subject still to certain conditions.

The SEC’s move allows unified or integrated local bourses, referring to a financial market where assets like stocks and bonds are traded under a single entity as part of developing the country’s capital market.

Under the Securities Regulation Code, no industry or business group may beneficially own or control, directly or indirectly, more than 20% of the voting rights of the exchange.

In 2017, the PSE almost finished its takeover of PDS. However, the SEC blocked the transaction as it would breach the individual ownership limit under the law. —