A battle for control of the country's biggest power retailer, Manila Electric Co. (Meralco), seems to be in the offing again, now with two heavily cashed-up diversified conglomerates in the ring.

For days, talk has been rife among market players and observers about moves by Hong Kong-based First Pacific Holdings Inc., represented by telecoms executive Manuel V. Pangilinan, to snap billions of pesos worth of Meralco shares to foil a takeover bid by San Miguel Corp.

Recent newspaper reports quoting unknown sources said the Lopez family has found an ally in First Pacific, which bought a 3 percent stake in Meralco last week, causing the run-up in the price of the stock.

There were also reports that San Miguel too has "sympathetic partners"--like the Government Service Insurance System (GSIS) and the Ashmore Group--accumulating Meralco shares. Pension fund GSIS sold its Meralco stake to San Miguel in a block sale last October. Ashmore, on the other hand, is San Miguel's partner in other ventures, including giant oil retailer Petron Corp.

With the Lopezes' 34 percent stake and First Pacific's 3 percent, the two combined now hold about 37 percent direct stake in Meralco, putting them on an almost equal footing with San Miguel's direct 38 percent stake, an analyst told abs-cbnNEWS.com.

The parties could be in the race for the remaining 20 percent or so held by institutional and retail investors, who, according to the analyst, would not easily unload because Meralco remains a core holding.

In this case, a proxy fight to win control of the Meralco board could again ensue. In the run up to the May stockholders meeting last year, GSIS and the Lopez family and their allies engaged in a bitter public war for board control.

P150-M a day

In the past two weeks, Meralco shares rose 9 percent from their close of P82.50 each on Feb. 16 to P90.00 on Feb. 27, with total shares traded valued at P7.2 billion.

A week before, Meralco shares were sold in two special block sales at P72.50 each for a total of P853 million.

In all, for the whole month of February, Meralco gained 50 percent from its finish of P60 on Feb. 2 to P90 on Feb. 27. Since around the middle of the first week, trading in Meralco resulted in a daily value turnover of no less than P150 million. Noteworthy was the P3.64 billion value turnover on Feb. 23, which traders said was because of First Pacific's purchase and which landed Meralco as one of the top gainers.

BDO analyst Fitz Aclan said there is no fundamental reason for the stock's rapid and steep rise. "Whoever is buying is looking at the bigger picture, at the whole franchise. Valuations are not cheap."

Analysts told abs-cbnNEWS.com that speculation over the brewing battle for Meralco is expected to continuously push its share price up in the coming days.

"A lot of public investors have also been enticed to buy up Meralco shares. Other analysts say it can reach P100 a piece. But these developments are rumor-driven. If investors are not careful, they could be caught up in all of this," one said.

Aclan noted it, too. "Given that there is a struggle for control within the firm, we expect to see some last minute scampering for shares ahead of their deadline for validation of proxies."

Meralco to telco

Manuel Pangilinan neither confirmed nor denied that First Pacific is accumulating shares in Meralco.

In the sidelines of an earnings presentation of Philippine Long Distance Telephone Co. (PLDT), the cash cow of First Pacific, Pangilinan commented, "Let me say, as a generic manner, whenever we invest in a company, our main objective is to raise shareholder value and we would like to work with the existing board and with existing management."

Analysts, however, are split on why Pangilinan's group is getting into Meralco.

Before San Miguel bought the 27 percent stake previously held by GSIS in the utility, Pangilinan was said to be eyeing the same deal.

San Miguel acquired a stake in Meralco in line with its effort to diversify into high-growth industries.

Ramon Ang, president of San Miguel and vice chairman of Meralco, previously told reporters that he was toying with the idea of using Meralco power lines as the same delivery infrastructure for its broadband business under Liberty Telecom Holdings Inc., whose additional income could offset expenses related to Meralco.

An analyst said San Miguel's takeover of Meralco threatens PLDT since the telecoms firm's lines also ride on Meralco's network infrastructure.

The same source said that Pangilinan has decided to team up with the Lopezes because San Miguel was also reportedly investing in Express Telecommunications Co. Inc. (Extelcom), which plans to directly compete with PLDT's Smart Communications and the Ayala Group's Globe Telecom. The Lopez family owns another telephone company, Bayan Telecommunications.

The analyst said new entrants in the telco industry could start a real price war, which could shrink earnings of PLDT and Globe.

Meanwhile, another analyst believes Pangilinan's group is not in a takeover bid with the Lopezes and will not aggressively buy into Meralco.

"I think they acquired a stake just for mere investment. The group is not known to be political and the Meralco business is highly politicized. The power industry is also highly regulated. It would be a big risk for them to get into it. It would just cause them headache," he said. -- with report from Maiki Oreta, ABS-CBN News