February 3, 2020 / 10:28 AM / 17 days ago

UPDATE 2-Embattled Manila Water shares jump after tycoon Razon buys stake

* Manila Water sells 25% shares to local firm

* Deal comes as water concession deals are under review

* Investor seen as having good ties with president

* Manila Water shares surge as much as 20% (Adds details, and fund manager and economist’s comments)

By Neil Jerome Morales

MANILA, Feb 3 (Reuters) - Shares in Manila Water Co Inc jumped by up to a fifth on Monday after owners the Ayala family, who had come under attack from Philippines President Rodrigo Duterte, sold a 25% stake to billionaire Enrique Razon.

Duterte’s threat to strip Manila Water and fellow concession holder Maynilad Water of their business supplying the Philippines capital had cost the company as much as three quarters of its market value since last December.

Razon, who is CEO of International Container Terminal Services Inc, paid 10.7 billion pesos ($210 million) for the stake through his infrastructure firm, Prime Metroline Holdings Inc, Manila Water said in a statement.

He becomes the second largest shareholder after Ayala Corp , run by one of the country’s oldest business families, which holds 38.6%.

Ayala has faced repeated attacks from the popular president.

“If Mr. Razon is going to be the middle man for both parties, and if the relationship of Razon with government is good, it is a good signal,” said Alan Joseph Amador, fund manager at The Insular Life Assurance Co in Manila.

Although Razon has no clear ties to Duterte, the Ayala dynasty that has prospered since Spanish colonial times in the 19th century has been a target for the president over its telecoms and property businesses as well as the water company.

Manila Water’s shares were the Philippines’ most actively traded on Monday. They jumped as much as 20% to a seven-week high, before paring gains to 4.9% at market close, while the broader index fell 0.89%.

“We are confident that our collective experience, technical capabilities, and corporate synergies will be of great benefit to Manila Water, the people it serves, and its other stakeholders,” Razon said in a statement.

CASINO

Razon, ranked by Forbes as the fourth richest Filipino with a net worth of $5.1 billion, has ventured into power distribution and bulk water supply since Duterte took office in 2016.

He is also chairman of Bloomberry Resorts Corp, which owns and operates a $1.2 billion megacasino.

Razon’s deal represents a 6.9% premium to Manila Water’s closing price of 12.16 pesos on Thursday.

Duterte had rebuked Manila Water and Maynilad Water over the terms of their concessions with the government which expire in 2022 but are subject to a 15-year extension under review, something the president has labelled “onerous and disadvantageous” to the public.

As well as threatening to take away concessions to supply a combined 16 million customers, Duterte said he was ready to sue their billionaire owners for economic sabotage.

The president’s office made no immediate comment on the deal with Razon.

After Duterte’s attack, Manila Water dropped a request for higher water rates and said it would forego a 7.4 billion peso arbitration award.

The reviews of the water company concessions had added to uncertainty for foreign investors, Nomura economist Euben Paracuelles said.

“These are very sector-specific issues but the risk is that these questions show that sentiment overall could start to be affected,” he said. (Additioanl reporting by Karen Lema; Editing by Matthew Tostevin and Jason Neely)

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