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Tighter delisting rules ‘beneficial’ to stakeholders

By Revin Mikhael D. Ochave, Reporter

THE DECISION of the Philippine Stock Exchange (PSE) to tighten its rules on voluntary delisting has also given additional control to minority stakeholders, analysts said.

“The PSE’s additional rules (on voluntary delisting) are enough and give extra protection to minority shareholders,” said AAA Southeast Equities, Inc. Research Head Christopher John Mangun in an e-mail interview.

On Dec. 21, the PSE released a memorandum confirming that the Securities and Exchange Commission (SEC) had approved changes to voluntary delisting rules.

“The delisting must be approved by: a. At least two-thirds of the entire membership of the board, including the majority, but not less than two, of all of its independent directors; and b. Stockholders owning at least two-thirds of the total outstanding and listed shares of the listed company,” the PSE said in the memorandum.

Mr. Mangun said the additional requirements on voluntary delisting had given more control over company proceedings.

Also included under the said amendment, the company must also make sure that votes against the delisting plan do not exceed 10% of a company’s total outstanding and listed shares.

Previously, a company could delist as long as it had secured the approval of its board.

Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said in a mobile phone message that the amended voluntary delisting rules is better than the old provisions, and has a better effect overall to the company.

Furthermore, Mr. Pangan said the new rules would give a bit of protection for a company’s minority stakeholders.

“Generally, it will somehow protect the minority shareholders as it tightens the delisting rules,” he said.

In addition, PSE said in its memorandum that the minimum tender offer price “shall be the higher of” the highest valuation based on a fairness opinion or valuation report given by an independent valuation provider. It should also be higher than the volume weighted average price of the listed security for one year immediately before the date of the company’s disclosure of the board approval of its delisting plan.

The new rules are a change from the practice of basing the tender offer price only on fairness opinion.

Mr. Mangun said the new rule on tender offer price gives minor shareholders the chance to buy more shares in the market, which would raise its price, if they want a higher tender offer.

“Before, the tender offer is decided by a third party that the company hires. So, minority shareholders have no say,” Mr. Mangun said.

Meanwhile, China Bank Securities Corp. Research Director Rastine Mackie D. Mercado said the new rules would give companies additional reasons to think twice before delisting.

“The amendments set a higher bar for companies when it comes to pursuing voluntary delisting, which they now have to weigh in their decision-making,” Mr. Mercado said in an e-mail.

One recent company to receive approval from the PSE to delist its shares from the market was Pepsi-Cola Products Philippines, Inc.

On Dec. 18, Pepsi announced that its petition for voluntary delisting was approved and the delisting of its shares from the PSE’s official registry had already been ordered.

The company decided to voluntarily delist from the bourse after its public ownership fell to 2.1%, lower than the 10% minimum requirement of the PSE.

The PSE created the new delisting rules in accordance with the complaints on the delisting of Melco Resorts and Entertainment (Philippines) Corp. and Travellers International Hotel Group, Inc.

“PSE revisited the voluntary delisting rules following the receipt of complaints from the market that minority stockholders are essentially forced to accept a company’s decision to delist and the tender offer price offered by the listed company or delisting proponent, under the threat of being left with shares that have no secondary market,” the bourse operator said when the draft rules were released in December 2019.

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