Meralco sale to PLDT splits Lopez clan

Shortly after his clan announced a deal to sell most of its stake in Manila Electric Co. (Meralco) on Friday, Meralco chair Manuel Lopez was seen brooding at the tomb of his father, Eugenio Lopez Sr. at the Manila Memorial Park in Sucat, Parañaque City.

He was in great anguish, for he was among the last to find out that a 20-percent stake in the power retailer had been committed for sale to the group of Manuel V. Pangilinan, chair of Philippine Long Distance Telephone Co. (PLDT), a Meralco official said in an interview with the Philippine Daily Inquirer Wednesday.

The deal will dilute the Lopez clan’s interest in Meralco, which has been the nucleus of its business empire for the past 49 years, to 13.4 percent.

Although financial markets generally viewed the deal as favorable to the Lopez conglomerate, which is grappling with about $500 million in debt, it has divided the clan and created factions among the once closely-knit Lopez family.

Architects of deal

Sources close to the family confirmed that the architects of the deal were the third-generation Lopezes—Federico and Benjamin, who are the sons of Manuel’s older brother Oscar, now considered the clan’s patriarch after the death of Eugenio “Geny” Lopez Jr., elder brother of Oscar and Manuel.

The younger Lopezes believe that the future of the family’s power business is no longer Meralco but its power generation companies—First Gen Corp. (First Gen) and Energy Development Corp. (EDC).

Despite being chair of Meralco, Manuel did not have any inkling that his brother Oscar had already hatched a deal with Pangilinan’s group.

“He only found out the day before the signing, when everything had been finalized,” the Meralco source said. “It was done without consultation.”

Betrayed

Like Manuel, the source said ABS-CBN Broadcasting Corp. CEO Eugenio “Gabby” Lopez III felt betrayed by the move, especially because his father Geny—who was among those who struggled against the Marcos dictatorship—considered Meralco a crown jewel and had fought all odds to keep it as a family legacy.

At the special board meeting of First Philippine Holdings Corp. on Friday to seal the agreement, Manuel and Gabby did not attend.

The rest of the Meralco organization also felt betrayed when they found out about the deal, said the Meralco source.

“They felt offended that control of Meralco was sold at a measly price of P90 per share,” the source said.

Alternatives

The Manuel-Gabby camp was also of the view that if there was a need to raise money to pare down debts, there were other alternatives, like selling one of the family’s power plants instead of unloading a big part of Meralco itself.

“I think nobody wins in a situation like this. We had to sell down our stake to meet obligations,” said Benjamin Lopez, First Philippine Holdings vice president.

Other sources said that Oscar’s sons believed that in the next few years, it would be the power generation business that would need Meralco instead of the other way around.

Manuel’s camp, however, believes that without Meralco, the power generation companies can’t be assured of a steady business.

The Meralco insider said Manuel had been purposely kept out of the loop because his older brother knew that he would oppose the deal.

Besides sentimental reasons, Manuel believes that the power generation and distribution businesses would work best over the long term if they remained within the Lopezes’ hands.

The Lopez clan is thus divided between those who wanted to keep Meralco and those who think it is dispensable. It was the latter that prevailed.

3 provisions

But at the very least, the Meralco source said Manuel was able to push for some provisions in the shareholders’ agreement with Pangilinan that would provide for the following:

• Ensure security of tenure for the existing employees.

• Continue Meralco’s non-contributory retirement fund.

• Ensure no animosity with San Miguel Corp.

Smokescreen

The source also noted that there was never any animosity between Meralco and San Miguel and that talks over a tug-of-war might just have been used as a “smokescreen” by those with intention to sell Meralco.

The source noted that Manuel and San Miguel president Ramon Ang were in regular communication, corroborating earlier Inquirer reports that it was Manuel who invited San Miguel to invest in Meralco.

The source said Manuel believed that San Miguel was not planning a hostile takeover of Meralco.

Ang had said that his company would let Pangilinan’s group run Meralco and would not engage the PLDT group in a proxy war.

San Miguel and its allies are estimated to control anywhere between 38 and 43 percent of Meralco.

3 crown jewels left

After this transaction, the Lopez family will still be left with three publicly listed crown jewels: ABS-CBN, power producer First Gen and geothermal power producer EDC.

Meralco is the largest distributor of electricity in the Philippines with a service area of 9,337 square kilometers, where about a quarter of the country’s population resides.

It has a customer base of about 4.5 million, comprising commercial, industrial and residential customers.

In addition to power distribution, Meralco operates a fiber optic network of more than 1,000 kilometers and provides leased line connections, data networking solutions and disaster recovery transport services.

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