What the Ayala-Razon deal on Manila Water means

Philippines’ oldest conglomerate, the Ayala group, and international ports and casino tycoon Enrique Razon announce their partnership (38%, 25%) in Manila Water, an Ayala-controlled business now in political hot water.

The deal makes business sense: Manila Water has been aggressive in its efforts to expand abroad to widen its revenue base beyond the Philippines. Razon’s ICTSI Holdings has been pretty successful in expanding its port network all the way to Africa, Europe, Middle East, Latin America and other points in the global map.

Locally, Razon has been busy locking in opportunities in the water and power distribution utility sector. 

But the Manila Water deal’s timing is suspect because the water unit is reason the Ayalas are now being persecuted by Duterte — who Razon supports. Cannot shrug off the political factor on this one — not just on the timing, but also on the choice of business partner.

Talk about timing: It’s great for Razon’s Trident Water, which acquired the substantial 25% stake in Manila Water FOR A STEAL: only P13 a share; slightly above the P12.16 price before it suspended trading on Friday.

But for the Ayalas, they could have raised more than the P10.7 billion paid by Razon’s group for that 25% stake had the share price not plummet due to recent circumstances. 

Manila Water’s share price has been dramatically dropping from its 52-week high of P27 per share since Duterte publicly vilified the Ayalas over supposedly “onerous” provisions of the water contract.

At the core of investor uncertainties is whether Manila Water will even be a going concern, considering the Duterte government’s threat to nationalize it, and even reneg on the previous agreement to extend its concession contract, which will expire in May 2022, for another 15 years or up to May 2037.

Since Manila Water won an arbitral award for P7.4 billion the government owed the firm for failing to raise rates, the populist Duterte has warned the Ayalas he will jail them and, worse, get them killed.

Personality-wise, the partners are seemingly an ocean apart. Razon is a brash and no-nonsense tycoon so different from the mild-mannered and philosophical Ayala brothers Jaime and Fernando.

Razon is also into the cash-rich but risky casino business, which the Ayalas didn’t want to get into before because of their family-friendly business reputation. But they’ve previously worked together in a water infrastructure project.

The Ayalas are not reinventing the wheel. 

This partnership follows a strategy the Manila business elite has been adopting to survive a Duterte attack: find a business partner who is a Duterte ally. 

Roberto Ongpin did it when he sold his Philweb shares to Greggy Araneta, an in-law of the Marcoses who are now on the right side of political fence. Soon after, Philweb’s franchise was renewed.

The Prietos announced the sale of their crown jewel The Philippine Daily Inquirer to Ramon Ang who Duterte described as his ‘fast friend‘. Soon after, Duterte softened on the broadsheet that he loathed for monitoring the death tally of his war-on-drugs.

Pending questions are:

  1. Will Duterte now ease up on the Ayalas? Will Manila Water’s east zone concession be extended, as initially agreed, from 2022 to 2037? Will the personal attacks against the family members stop? Will the issues raised against the UP Technohub leasing rates end?
  2. And what will Manny Pangilinan, who has been attacked alongside the Ayalas, do now? What does he have under his sleeves? Will he benefit from the Ayala-Razon deal in terms of recovery in his affected firms’ share prices? Or will he now be singled out? ‪
  3. What are the Lopezes, themselves being persecuted as their media giant ABS-CBN’s franchise renewal hangs in the balance, thinking and strategizing now? Will they also follow the ‘formula’ or fight their own fight?‬



Lala Rimando, journalist

Comment as Lala Riman

One response to “What the Ayala-Razon deal on Manila Water means”

  1. […] Check out this piece I wrote on the first deal announcement: WHAT THE AYALA-RAZON DEAL ON MANILA WATER MEANS […]

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