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PSE requires independent valuation reports on tender offers of firms planning to delist

THE PHILIPPINE Stock Exchange, Inc. (PSE) is requiring companies that are planning to delist to provide independent valuation reports and fairness opinions on their tender offer, in an effort to protect small investors.

In a memorandum released on Friday, the bourse operator said the Securities and Exchange Commission (SEC) approved the amendments to the PSE guidelines for fairness opinions and valuation reports.

“The amendments pertain to the express inclusion of tender offers undertaken pursuant to delisting proceedings in the list of transactions where a fairness opinion and valuation report prepared by an independent valuation firm duly registered or licensed by the SEC and accredited by the Exchange are required,” the PSE said.

The rules have been updated to address concerns made by investors over the “low” tender offer price given by some companies that were delisting from the exchange.

The PSE memorandum took effect on Friday.

This means a company conducting a tender offer because it is delisting from the exchange will now need to submit a fairness opinion and the valuation report on the subject shares.

Tender offers for delisting purposes will be covered by the guidelines on the content of the fairness opinions and valuation reports.

The fairness opinion and valuation report should be issued by an independent firm registered or licensed by the commission, and should be accredited by the exchange. These include investment banks, financial advisory firms, and accounting firms.

The firm writing the report should not have a holding or subsidiary company which gives financial advisory or external audit services to the applicant company. Any firm involved directly or indirectly with the applicant company is prohibited from issuing the reports.

“The applicant company shall submit one fairness opinion issued by an independent firm and supported by a valuation report. The said supporting valuation report may be based on and/or supported by relevant valuation reports issued by different independent experts who are qualified to issue the report under any applicable accreditation or implementing guidelines of the Exchange, such as, but not limited to, property appraisal companies and mining professionals,” the exchange said.

The valuation report must include details and a comprehensive explanation on the basis of the valuation and assumptions used, as well as the structure, condition and analysis of the market.

Analysts welcomed the new guidelines as it aims to implement transparency in the stock market.

Summit Securities, Inc. President Harry G. Liu said the new guidelines protect common shareholders, as some companies when delisting often undersell.

“It’s always to protect the minority shareholder properly. The majority is always the winner, but they always have to protect [all of] the shareholders,” Mr. Liu said in a phone call on Sunday.

“This has been an ongoing initiative on the further development of the capital markets to ensure transparency, level playing field, and protection for the investing public, as aligned with global best practices,” Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said in a Facebook message on Sunday.

“This is also consistent with the integration of stock markets among ASEAN/Asian countries that may require harmonization/alignment of regulations/rules in the region,” he said.

Mr. Ricafort said the new guidelines would also “ensure proper or due valuation of tender offers especially for minority shareholders.” — Keren Concepcion G. Valmonte

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