Monday, July 23, 2012

When There's Smoke, There's Fire: MVP Purchase of GMA 7 "Just a Matter of Time"

IN THE NEWS from Philstar Online

It now turns out that there's more than a little bit of truth to the rumored sale of GMA 7 to MVP, which we first heard about seven months ago. The actual offer price may not be as exorbitant as what was first reported (25 times GMA's market cap), but the premium of almost 100% (from an offer of up to 60 billion pesos against a market cap of 34 billion) must be making GMA majority shareholders salivate. Retail investors of the network giant should also have reason to be excited since they stand to gain still-handsome, if not as astronomical, returns.

At least now we have a more concrete answer to one of the questions we posted when the rumor first broke out in late December. In the next few months, we'll just have to wait and see how the remaining two issues will unfold:
  • If ABS-CBN would go the same way as Globe with the PLDT-Digitel merger and try to block the deal
  • How the stock prices of affected players (e.g., PLDT, GMA, ABS-CBN) would be affected
As of this writing, here's how the stock prices of the three firms mentioned above have behaved since the rumor broke out. 

PLDT (TEL): Up by 10% since December 26, 2011

GMA (GMA7): Up by a whopping 73% since December 26, 2011

ABS-CBN (ABS): Up by 23% since December 26, 2011

Finally, with this imminent deal we see how aggressively MVP has been pursuing monopoly profits in the industries that he enters, especially since the lack of an anti-trust law in the Philippines allows him to do so. In the next post, I'll discuss the different kinds of industry structure in more detail and why business persons like MVP find monopolies irresistible.

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