BY MARICEL E. BURGONIO Senior Reporter

TWO companies controlled by the  group of Manuel Pangilinan plan to  establish a new holding company that would hold their shares in the Philippines’ biggest electricity distributor.

In a disclosure to the Philippine Stock Exchange, Metro Pacific Investments Corp. (MPIC) said it is in talks with Pilipino Telephone Corp. (Pitlel) to put up a new company by combining their shares in Manila Electric Co. (Meralco).

MPIC said it is finalizing the terms of the reorganization of their Meralco shares. “Both parties are in the process of finalizing the required docu-mentation and obtaining the necessary consents,” MPIC said.

MPIC is the local unit of Hong Kong-listed First Pacific Co. Ltd., which also controls Philippine Long Distance Telephone Co. (PLDT), in turn the owner of Smart Communications Inc. and its unit, Piltel. Pangilinan chairs both MPIC and PLDT.

Piltel used to operate the Talk ‘N Text mobile phone network, before it sold this business to Smart. With the divestment of its telecoms business, Piltel had since been groomed to become the holding company of the Pangilinan group’s power-industry portfolio, after the former bought out the Meralco stake of the PLDT Beneficial Trust Fund.

MPIC said there is a standstill arrangement between the MPIC-Piltel group and the Lopez group that would stabilize the ownership in Meralco.

Under this, the Lopez group, through its holding firm First Philippine Holdings Corp., agreed that it will not sell or transfer any of its shares of voting common stock in Meralco except to MPIC for a period of three years, provided that an insignificant number of the utility’s shares may be sold to third persons under certain conditions.

The call option agreement for this transaction stipulates that MPIC should acquire the Meralco shares by end-March 2010.  The agreement also states that MPIC would have to lend First Holdings P11.2 billion, or half of the acquisition cost. The loan, which carries an interest of 5 percent per annum, will mature also by March 31.

In November, First Holdings agreed to sell half of its remaining 13.4-percent interest in Meralco for P300 a piece, or P22.4 billion, to MPIC.

To finance this acquisition, MPIC sold P12-billion worth of nine-year fixed rate corporate notes on the same month.

On January 30 this year, First Holdings announced the extension to February 28 of the deadline to grant the call option to purchase 6.6 percent of its Meralco stake to MPIC.

MPIC said that funding for the additional purchase of Meralco shares have been agreed with a syndicate of banks and with First Holdings.