The Philippine Competition Commission (PCC) has approved the acquisition of a controlling stake by Razon-led Trident Water Holdings Co. Inc., the holding firm of Prime Metroline Holdings Inc. in Manila Water Inc.
The PCC said in its commission decision the transaction will not likely lead to substantial lessening of competition in the market of the supply of raw water to the East Zone concession area since it is a natural monopoly with a captive customer base and no downstream competitors based on a concession agreement Manila Waterworks and Sewerage System (MWSS).
The review of the agency’s mergers and acquisitions office, showed the merged entity “will neither have incentive nor ability to engage in customer or input foreclosure in the said market.”
While PCC found there is absence of horizontal overlaps between the parties and are not direct competitors, it expressed that a vertical relationship exists between the two within the water sector before the transaction.
The agency said it allowed the transaction as customer or input foreclosure is unlikely given that the arrangement is meant to service the East Zone even beyond the lifetime of Manila Water’s concession, including the procurement, development, allocation, rate rebasing and other supply-and-demand dynamics in the water sector being regulated by the MWSS.
The transaction involves the acquisition of Trident Water of 51 percent voting interest in Ayala Group’s Manila Water by way of Trident Water’s subscription of 820 million common shares of stock from unissued authorized capital stocks of the latter.
Under the deal, Manila Water’s subsidiary, Philwater Holdings Co. is set to grant proxy in favor of Trident Water over the seller’s preferred shares to allow Trident Water to achieve a 51 percent voting interest.