The Philippine Competition Commission (PCC) was of the impression that important deals such as the Udenna Group’s $4.1 billion acquisition of UC Malampaya Philippines Pte. should be subjected to a competition review.
While the deal fell short of the allowable threshold base of P50 billion, the commission said transactions this big will have an impact on the industry as far as competition matters are concerned, and to consumers, as well.
Competition Commission chairperson Arsenio Balisacan reiterated on Monday the importance of merger reviews to safeguard the market from possible anti-competitive deals.
However, the commission defers to sector regulators the other aspects of accrediting or approving the transaction for standards outside of competition.
Udenna’s transaction to take over controlling stake in Malampaya from Shell this year, was not notified to PCC due to the increase in notification threshold to P50 billion under the Bayanihan 2.
In reviewing mergers and acquisitions, the PCC only looks at the competition aspect of transactions. PCC defers the other aspects of a firm’s viability for operations to the sector regulators.
In the first transaction by Udenna acquiring minority company interest from Chevron Malampaya in 2020, PCC found no competition issue then because Udenna was not engaged in the natural gas business.
Udenna now has the controlling power over the Chevron Malampaya LLC unit after it acquired 45 percent share of the offshore gas business.
Earlier, Senator Win Gatchalian said there’s enough evidence that the decision rendered by the Department of Energy (DOE) to approve the sale of Chevron Malampaya’s 45-percent stake in the Malampaya gas project to the Udenna group of Dennis Uy is defective and invalid.
“My opinion of this is that it is a defective approval, therefore the approval is invalid because there’s a lot of inconsistencies and any major transaction like this should not lead to confusion. Instead of us appreciating it, we got more confused by the DOE’s own admission that there is indeed confusion,” Gatchalian said in scrutinizing Udenna’s buy-out of Chevron in Malampaya during the hearing of the proposed 2022 budget of the DOE.
The Senate Energy Committee Chairperson made the statement after being told by DOE Secretary Alfonso Cusi that no prior approval by the government is needed in the Chevron’s transfer of its stakes to Udenna’s UC Malampaya Philippines Pte Ltd. and that it was based on an evaluation using the so-called “farm-in process,” which according to Gatchalian made DOE’s explanation all the more confusing.
Gatchalian sought clarification from Energy Secretary Alfonso Cusi during the budget hearing as he dug up the statements given by DOE officials to the Senate Energy Committee hearing in November 2020 affirming that the transaction between Udenna and Chevron requires prior approval of the DOE as stated under Section 11 of PD 87.