An Indonesian billionaire wants EDC: The $5-B offer raising the stakes in the Lopez feud

An Indonesian billionaire has proposed a $5 billion bid for Energy Development Corporation (EDC), a move that adds new tension to an ongoing power struggle within the Lopez family, one of the country's most influential business dynasties. The unsolicited offer, made by Barito Renewables Energy Tbk, an Indonesian firm, comes amid global energy market volatility and regional geopolitical tensions, including the closure of the Strait of Hormuz, which has driven up oil prices and import costs. The proposal was confirmed by First Gen Corporation, a major shareholder in EDC, to the Philippine Stock Exchange on Wednesday, July 15, though the company emphasized that no formal negotiations or agreements have taken place yet. The offer, described as indicative and non-binding, suggests that Barito sees potential in acquiring EDC, a key player in the Philippines' renewable energy sector. However, the specifics remain unclear, with First Gen stating that neither the parties nor any financial advisors have engaged in discussions regarding a possible transaction. The valuation of $5 billion refers to the equity value of EDC, excluding its outstanding debt, which some Indonesian media estimate brings the total cost of the deal closer to $7 billion. Should such a transaction proceed, the final amount paid would depend on the negotiated price and the distribution of proceeds among shareholders. EDC, once a publicly traded entity, has been delisted since 2018, leaving its ownership concentrated between two primary stakeholders. First Gen holds a 65% voting interest in EDC, primarily through its subsidiary Red Vulcan Holdings, which was established during the company's privatization in 2007. The second group, Philippines Renewable Energy Holdings Corporation (PREHC), owns 34.9% of the voting rights and is controlled by international investors, specifically Australia’s Macquarie and Singapore’s GIC, who acquired their stake through a $1.3 billion tender offer in 2017. Despite holding the majority of the voting power, First Gen’s economic stake in EDC is estimated at 45.8%, based on its own disclosures to the exchange earlier this year. This means that the remaining 54% of EDC’s economic interests belong to the Macquarie-GIC consortium. This division highlights a critical aspect of the situation: although the Lopezes maintain control through voting shares, they do not hold the majority of the company’s economic value. At the current exchange rate of approximately P61.70 per U.S. dollar, the $5 billion equity value translates to more than P300 billion. Based on the existing shareholder split, First Gen would receive around P140 billion, while the Macquarie-GIC group would get roughly P170 billion. This calculation underscores the possibility that Barito might target the foreign-held stake rather than the entire company. Such a move would not involve the Lopez family directly, as the proceeds would go entirely to the international investors. The implications of this scenario extend beyond mere financial considerations. If Barito acquires the PREHC stake, it would introduce a strategic competitor into EDC’s operations, Barito is known for operating Indonesia’s largest geothermal company. This shift could alter the dynamics within EDC, placing a foreign entity in direct competition with the Lopezes, who have long held sway over the company’s direction. The move could also signal a broader trend of international investment in the Philippines’ energy sector, particularly as local markets face increasing pressure from global energy price fluctuations. The situation reflects the complex interplay between corporate governance, international investment, and family politics. While the Lopez family retains control over EDC through voting mechanisms, their economic influence is less dominant compared to the international stakeholders. This dynamic creates opportunities for external players like Barito to enter the fray, potentially reshaping the future of one of the Philippines’ most vital energy companies. As the situation unfolds, the response from both the Lopez family and the international investors will likely determine the trajectory of EDC’s ownership and operational strategy moving forward.