Kohlberg Kravis Roberts & Co., the US investment firm known as KKR, emailed a proposal to First Philippine Holdings Corp. (FPH) and its power generation unit First Gen Corp. (First Gen) on July 10. KKR’s plan has three steps. First, it buys 8.43% of First Gen directly from FPH, and the two sign a shareholders’ agreement. Second, it offers to buy out everyone else who owns First Gen shares on the stock market, what’s called the public float, equal to 11.67% of the company. Third, that buyout is meant to support a request to take First Gen off the stock exchange entirely, a process called delisting. FPH laid all of this out in a letter to the Philippine Stock Exchange (PSE) dated August 13, Thursday.
But inside that letter sits what carries the real weight of the story: “KKR also said that any transaction, whether above the level of First Gen or at First Gen itself, which will give rise to a direct or indirect change of control, would trigger a mandatory tender offer and should command a full control premium which they expect to be no less than 30% above their offer price, or about P46 per share.”
Work out the math in that sentence and KKR’s own base offer price comes out to about P35 a share. That’s about 25% above First Gen’s P28 close on August 13. Spread across First Gen’s roughly 3.6 billion outstanding shares, the company values out to about P126 billion at that P35 price, and about P165 billion at the P46 control price.
