KKR proposes First Gen delisting

By Sheldeen Joy Talavera, Reporter

GLOBAL investment firm Kohlberg Kravis Roberts & Co. (KKR) has proposed increasing its stake in Lopez-led First Gen Corp. and launching a tender offer for its remaining public shares, a transaction that could lead to the power producer’s voluntary delisting from the Philippine Stock Exchange (PSE).

In a clarification to the stock exchange on Thursday, First Gen said KKR had made a preliminary, non-binding offer to First Philippine Holdings Corp. (FPH) and First Gen that does not create legally binding obligations.

First Gen said the proposal was e-mailed on July 10 and that KKR offered to acquire an additional 8.43% stake in First Gen from FPH and enter into a shareholders’ agreement with FPH.

Under KKR’s proposal, the investment firm would then launch a voluntary tender offer for the entire 11.67% public float of First Gen’s outstanding common shares, which would support a petition for the company’s voluntary delisting from the PSE, according to First Gen.

First Gen is the power generation arm of the Lopez group through FPH, which holds a 67.84% stake in the company, according to its latest public ownership report. KKR, meanwhile, holds a 19.9% economic interest.

First Gen also said KKR had indicated that any transaction, whether above the level of First Gen or at First Gen itself, that would result in a direct or indirect change of control would trigger a mandatory tender offer.

KKR said such a transaction should command a full control premium of at least 30% above its offer price, or about P46 per share, according to First Gen.

China Bank Capital Corp. Managing Director Juan Paolo E. Colet said FPH should “seriously look into KKR’s offer and ensure the best deal for all shareholders, including public investors.”

“It’s also important that they are transparent about the process. An offer to take [First Gen] private, even if phrased as non-binding, is material information that should be timely disclosed to the investing public,” he said in a Viber message.

“I’ve always said that [First Gen] is ripe for delisting, but any such exercise should be on terms beneficial to minority shareholders,” he added.

Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., likewise said FPH should consider the proposal as it could provide greater capital flexibility while preserving control of First Gen.

“That capital could strengthen FPH’s balance sheet, support investments elsewhere in the group, or provide additional flexibility as the Lopez companies reassess their portfolios,” he said in a Viber message.

Mr. Arce said, however, that minority shareholders would need to decide whether the proposed tender price “adequately captures the company’s long-term value.”

At the local bourse on Thursday, First Gen shares rose by 2.38% to close at P28 apiece.