The Securities and Exchange Commission (SEC) said it has ordered Korean food group Lotte to stop its tender offer on Pepsi Cola Products Philippines Inc. and allow shareholders to withdraw their consent to the tender offer.
The SEC said the decision is based on the “perceived” question of independence of the entity that made the fairness opinion on the valuation used to price the Pepsi tender offer.
“In a January 31 letter, the SEC Markets and Securities Regulation Department (MSRD) ordered Lotte to immediately cease from conducting its mandatory tender offer for the minority shareholders of PCPPI and to allow shareholders who have tendered their shares to withdraw the same for noncompliance with Rule 19 of the 2015 SRC IRR, particularly the Guidelines on the Conduct of Valuation and Issuance of Fairness Opinion under Rule 19.2.6,” the SEC said.
“Among others, the fairness opinion attached to the tender offer report filed by Lotte was issued by P&A Grant Thorton, which is currently providing bookkeeping services to two entities related to PCPPI. The MSRD finds that the business relationship of P&A Grant Thorton with the two entities, where PCPPI holds substantial shareholdings, could reasonably be perceived to undermine its independence to conduct and issue the fairness opinion,” it added.
Lotte in December offered to buy the publicly-owned shares in Pepsi at P1.95, a 12.27 percent premium over the six-month volume weighted average price (VWAP) and a 6.14 percent premium over the three-month VWAP of PCPPI’s common shares then.
The tender offer is extended to “all shareholders other than Lotte Corp. and the members of the Board of Directors with respect to their qualifying common shares and the officers of the company.”
The Korean group made the offer through Lotte Chilsung Beverage Co. Ltd.
“Lotte Chilsung views the tender offer as an opportunity for shareholders to sell their shares and potentially realize their investment. For its part, Lotte Chilsung is undertaking the tender offer as a strategic initiative that will enable it to acquire significant economic interest in PCPPI,” the group said.
Lotte said, however, it has no plans to delist PCPPI from the local bourse. It also said that it has currently no plans relating to PCPPI that would result in any merger, reorganization, or liquidation of the company, or that would result in a material change to the company’s corporate structure or business.
The tender offer period started last Dec. 12, 2019 and ran until Jan. 16, 2020.
