Friday, April 27, 2012


MEDIA mogul Manuel V. Pangilinan, chairman of the telecommunications conglomerate PLDT/Smart/Sun, wants to acquire control of television network GMA 7.

A formal price offer still has to be worked out to bridge a P15-billion gap to swing the deal, but all major industry indicators—dropping profits, shifting consumer markets, rising costs, expensive new technology and cut-throat competition—are conspiring to make the buyout of GMA 7 inevitable, market analysts say.

“The major and controlling shareholders have not received a price that is acceptable to them,” GMA Network president Gilberto Duavit Jr. said in a statement responding to media reports.  “That is not to say that GMA 7 will not be sold, but at the moment we are presently not pursuing serious negotiations with the PLDT group because they have not offered us a price that is acceptable to our shareholders,” Duavit said.

For weeks, the industry has been abuzz with reports that acquisition talks were under way.  But price matters most, and one has to read the nuanced signals correctly.

Industry indicators

Major indicators foreshadow a shakedown in the television industry.

Technology is changing to high-definition, requiring massive capital input.  Industry profits are shrinking and the rules of the game are changing.

Two major players—ABS-CBN and GMA 7—are suffering double-digit percentage reductions in profits.  Advertisers are cutting back on spending.

An aggressive new kid on the block, TV 5, is challenging industry rules and rewriting tried-and-tested formulas.

Channel 5 is on the prowl for an acquisition.  And there is a company ready to sell for the right price.

Purported asking priceLast week, a source in Hong Kong-based First Pacific Co. Ltd., of which Pangilinan is CEO and Managing Director, said that the “asking price” for GMA 7 was between P45 billion and P51 billion—an amount the Pangilinan group was said to be willing to pay.

But latest reports said the three families controlling GMA 7 want P60 billion for the company.

The closing price of GMA 7 at the Philippine Stock Exchange on April 25 was P9.36.  A 100-percent stake in GMA 7 would cost over P31 billion, but it is customary for buyers to pay a premium for acquisitions that give them control of their targeted companies.

At P45 billion, Pangilinan is willing to pay a premium of about 48 percent to GMA Network’s present market capitalization, but the controlling shareholders seek a premium of 94 percent.

The Pangilinan group has investments in several media companies and full ownership of television network TV 5. The PLDT Beneficial Trust Fund, through its subsidiary Media Quest Holdings, also has minority interests in print media: BusinessWorld, Philippine Star and the Philippine Daily Inquirer.

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