Posted on 09:51 PM, January 25, 2010 [ BusinessWorld Online ]
Paramount Land Equities, Inc., the unlisted firm that is the new majority owner of Eton Properties Philippines, Inc., wants regulators to reconsider an order requiring it to buy out minority shareholders in the Lucio C. Tan-led property developer.
In a six-page letter to the Securities and Exchange Commission (SEC), Paramount Land claimed relevant documents, which it said might have been overlooked, would prove that it was exempted from the tender offer rule.
Last year, Eton Properties swapped 1.6 billion shares for a 12-hectare property owned by Paramount Land in Quezon City, with the shares valued at P2.50 apiece. Following the swap, Paramount Land became Eton Properties’ majority shareholder
The shareholdings of Saturn Holdings, Inc., meanwhile, was diluted to 44%. Both Paramount Land and Saturn Holdings are privately held firms under the Lucio Tan group of companies.
The SEC thereafter required Paramount Land to also buy the shares of the minority stockholders at P2.50 per share under the tender offer rule.
The acquisition price represented a P0.27 premium over Eton Properties’ three-month weighted average trading price of P2.23-per-share price in August to October last year.
The tender offer rule says that a company that buys at least 35% stake in another company within a year must offer to buy the shares held by minority stockholders at the same price.
The rule aims to protect minority shareholders from the possible dilution of their shares by giving them a chance to get out of the company.
Paramount Land however argues that, along with Saturn Holdings, it is “beneficially owned” by the Lucio Tan group, which means that the stake of minority shareholders was not diluted when it bought a portion of Saturn Holdings’ 94.34% stake last year.
“The property-for-share swap will not result in a dilution of shareholder value and will not result in a change of management and control in Eton Properties. Thus, there will be no violation of the spirit, intent and purpose of the law,” Paramount Land said.
Paramount Land said further that “exemptive relief” should be given to a company if the acquisition was done in “good faith.”
In this case, Paramount Land said Eton Properties was able to acquire a prime piece of property for corporate purposes without using cash, in effect preserving the resources of the company.
“Ultimately, the acquisition of this property will inure to the benefit of Eton’s stockholders,” Paramount Land said.
An SEC official said Paramount Land’s case is still under review and that regulators were awaiting certain documents.
Shares in Eton Properties slipped by 3.22% or P0.08 to P2.40 apiece yesterday, tracking the overall decline of the local equities. -- Kristine Jane R. Liu
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