ACQUISITION OF GMA7 NETWORK, INC. BY BUSINESS TYCOON MANUEL V. PANGILINAN (MVP) OF PLDT THROUGH MEDIAQUEST HOLDINGS, INC. – A CRITIQUE PAPER BACKGROUND
Businessman Manuel V. Pangilinan , Chairman and with interests on the companies listed below is moving closer to deal to acquire GMA7 Network, Inc (GMA7) at an estimated price of P52.5 billion, potentially grabbing a leading market position in the broadcasting industry for convergence with his group’s flagship telecommunication and media enterprises. 1. Philippine Long Distance Telephone Company (PLDT)
2. Associated Broadcasting Company (TV5),
3. Smart Communications
4. SPi Global
6. Stradcom International Holdings
7. CURE Inc. (Red Mobile)
8. San Beda College
9. First Pacific
10. Cignal Digital TV
11. Pilipino Telephone Corporation (Talk ‘N Text)
12. First Pacific Tollways Corporation
13. Metro Pacific Investments Corporation
14. Philex Minging Corporation
15. Digital Telecommunications Philippines
16. Holy Angel University
Media Quest Holdings, Inc. the media conglomerate owned by the Beneficial Trust Fund of the PLDT, is the party to the buyout deal that will give it close to 80% control of GMA7 Networks. The Media Quest Holdings, Inc. owns the media establishments such as Associated Broadcasting Company (TV5), Nation Broadcasting Corporation (NBC), Cignal Digital TV (Cignal), Unitel Group and 30% interest in Business World Publishing Corporation (Business World). The proposal of MVP’s group is that the acquisition will be based on what was determined as an “enterprise value” of Php52.5 billion. Enterprise value factors in preferred stocks, debt and cash reserves that are usually not captured by mere market capitalization. In this case, the package includes 1.5B in preferred shares that have five times more voting rights than common shares (now at 3.36B) but convertible at par to common shares at a 1:1 ratio. Pangilinan’s group would pay in cash and that loans would only fund a small portion of the transaction; part of the cost would be funded through equity. GMA7 NETWORK, INC. BACKGROUND
GMA7 Network, Inc. is engaged in television and radio broadcasting, and new media services. GMA7 is controlled by three families – Jimenez, Duavit and Gozon clans. Key executives are Felipe L. Gozon as the Chairman and CEO, Gilberto R. Duavit as the Executive Vice President.
GMA7 net income in 2011 plummeted 39% to Php1.72 billion from P2.82B in 2010. Less money came in from advertisers and more money was spent on operating expenses. As of EOY 2011, GMA7 has Php12.39B in Total Assets and with Php2.5B Total Liabilities of which Php1.9B is current liabilities. (Sources: Audited Financial Statements – BLOOMBERG BUSINESS). MEDIAQUEST HOLDINGS, INC. – Associated Broadcasting Company (TV5)
TV5 is owned by Media Quest Holdings, Inc., a wholly owned subsidiary and part of the beneficial trust fund of the PLDT headed by business tycoon Manuel V. Pangilinan.
ABC5 was founded by Joaquin “Chino” Roces owner of the Manila Times. After the People Power Revolution in 1986, Roces then appeal to the late President Cory Aquino for the restoration of the network. On year 2003, Businessman Antonio “Tonyboy” Cojuangco, Jr. acquired ownership of ABC5 who then served as Chairman of PLDT.
On October 2009, 70% of the share was divested and sold to Media Quest Holdings, Inc. broadcasting division of PLDT to recover its assets from the global financial crisis.
For the last couple of years, ABC (TV5) experienced net loss on its financial performance. For the EOY 2011, the company lost Php4.24B representing a 91% increase from its net loss of Php2.16B on the previous year. ABC (TV5) assets grew to Php8.84B from 2010’s level of Php5.42B as the network invested more in a broadcast equipment to upgrade its old fixed assets. However, its level of receivables – unpaid obligations...