• Reading time:9 mins read

Indonesian magnate controls Meralco

First of a Series on the Salim Empire in the Philippines


Through several corporate layers, the 65-year-old Indonesian Anthoni Salim who owns Indonesia’s biggest conglomerate controls Manila Electric Co. (Meralco), the Philippines’ biggest private corporation and the monopoly in electricity distribution in Metropolitan Manila, according to publicly-available corporate information.

I asked two people close to Salim’s conglomerate in the country two months ago for its top official in the country  to comment on this column’s topic. They replied that he didn’t want to.

It is probably the country’s most successful case of corporate imaging that the Indonesian tycoon’s control of Meralco—as well as Philippine Long Distance and several other huge firms—has been hidden from public consciousness.

Meralco Chairman Manuel V. Pangilinan, Mr. Salim’s point-man and top executive in the Philippines, has been been portrayed as the face of the Indonesian’s empire in the Philippines, that it is casually referred to as the “MVP Group of Companies.”

However, Mr. Pangilinan owns only token shares (25,000 out of the firm’s 1.2 million shares) in Meralco and less than two percent in Meralco’s ultimate mother companies, the Hong Kong based First Pacific Co., Ltd. and the Philippine-incorporated Metro Pacific Investments.

Salim’s control of Meralco starts with his 45 percent control of the firm which is, as it were, the “mother ship” of his empire in Asia, the Hong Kong-based First Pacific Co. Ltd., listed in that China special region’s stock market.


col 208 chart


Salim’s 45 percent holdings in First Pacific are through three offshore-firms, created in secretive, tax haven countries. He is the sole owner of Salerni International Ltd., organized in the British Virgin Islands.

Salerni in turn is the sole stockholder of First Pacific Investments (BVI) Ltd. also incorporated in that tax haven, and 57-percent owner of a similarly named corporation, but incorporated in another tax haven, Liberia.

The shares of the two First Pacific Investments and those directly held by Salim compose 45 percent of First Pacific’s (HK) total shares. (Anthoni in 2002 for some reason bought off shares in the two First Pacific investments from his brothers, therefore becoming the undisputed sole biggest owner of the First Pacific conglomerate.)

That Salim’s 45 percent shares in First Pacific means total control is obvious in that the next biggest stockholder are fund managers, who represent thousands of portfolio investors around the world: Lazard Asset Management with 7 percent and Marathon Asset Management with 4.4 percent. Some two dozen-fund managers own less than 1 percent. Pangilinan holds 1.4 percent shares.

The Metro Pacific layer

The next corporate layer for the control of Meralco is the Philippine-incorporated Metro Pacific Investments, which is, as it were, Salim’s command ship in the country.

A Salim holding firm called “Metro Pacific Holdings” has 56 percent ownership of Metro Pacific. (Salim’s control of the holding firm for some reason is through three other firms with interlocking ownership: the Amsterdam-based Intalink, B.V, Enterprise Holdings Corp., and First Pacific International.)

As in the First Pacific layer, that Salim’s firms’ 56 percent holdings in Metro Pacific represent complete control of the firm is beyond any doubt, for the remaining shares are distributed among nearly 40 fund managers, most of which hold less than 1 percent stocks.

The two biggest of these are T. Rowe Price International (UK) Ltd. and Morgan Stanley Investment Management, which hold, respectively, 1.6 percent and 1 percent of the firm’s stocks. Pangilinan has 0.09 percent of the shares, the minimum for him to have to be in its board.

Salim’s third corporate layer—or his third step—for his control of Meralco is a firm incorporated in 2010, Beacon Electric Asset Holdings. The firm is effectively 100 percent controlled by Salim, through Metro Pacific Investments, which has 50 percent shares, and a 100 percent PLDT subsidiary, PLDT Communications and Energy Ventures, which has the other 50 percent.

Salim controls 27 percent of PLDT. That holding may seem small, but that makes up the indisputable controlling bloc in PLDT, which has thousands of shareholders. Its next biggest shareholder with 15 percent shares is the Japanese NTT group. How Salim got to control the country’s biggest telephone firm is yet another story.

And at the end of the corporate layers: Beacon Electric Holdings has 50 percent control of Meralco. The next biggest shareholder is the San Miguel Corp. and its subsidiaries, which together have 27-percent holdings.

Lopez clan gone

Whatever happened to the old-elite Lopez clan, whose name had been synonymous with Meralco? After the Lopezes bought Meralco from its US owners in 1962, after they lost Meralco to Marcos’ brother-in-law Kokoy Romualdez, and then, after the EDSA revolution, President Cory handed back Meralco to them. The Lopez clan then, in 2009, sold most of the Meralco shares to the Indonesian Salim’s firms. The Lopezes now hold only 4 percent of Meralco.

One of course could believe that Mr. Pangilinan has full autonomy in running the First Pacific empire, and that he is of course the most patriotic of Filipinos. That would be supremely naive, unless one is in a socialist system.

But most of the Meralco and PLDT profits flow not to Pangilinan through his 1 percent or token shares in those firms, but to their owners. The lion’s share would be claimed by Salim, and the rest by the thousand or so US and European portfolio investors in First Pacific.

Pangilinan may be the most patriotic of Filipinos, but what happens if one morning, Salim wakes up deciding to replace him with the best executive the world can offer? He can even just pick from the list of the best CEOs in the world the Harvard Business Review annual determines.

And of course, what if, God forbid, Salim passes away, and we learn that the Indonesians had found a way for Salim’s holdings to be turned over to the state of Indonesia, which may have a policy of cut-throat competition with its neighbors?

There are important reasons why nearly all countries in the world have restrictions—not necessarily through their constitutions but through laws and regulations—on foreign ownership of strategic industries, especially utility companies. (That topic for a coming installment of this series.)

And who is Anthoni Salim? Forbes magazine ranked him as the third richest Indonesian last year. He is the youngest of the four sons of ethnic Chinese Liem Sioe Liong, who took the Indonesian name of Sudono Salim, and who had been for decades that country’s richest magnate.

Liem had been Indonesia’s most controversial magnate. He had been viewed as the former strongman Suharto’s most successful crony so much so that he and even Anthoni had to flee Indonesia during the anti-government, anti-Chinese May 1998 riots that eventually led to Suharto’s fall. Sources say that because of that harrowing experience, Anthoni lives mostly in Los Angeles.

The Salim conglomerate includes Indofood, the world’s biggest noodle factory and about 500 firms in diverse industries all over Asia. In Indonesia alone the Salim firms have a workforce of 200,000.

Quite significant though is that according to First Pacific’s 2012 annual report, its profits from its Philippine operations have outstripped those from its Indonesian operations starting in 2011, by about $200 billion in 2012.

Take it the way you want it.

Two interpretations

Salim’s control of Meralco and PLDT—both utility firms—is a mockery of our constitutional and legal restrictions on foreign control of strategic industries. And these are not only strategic industries: Salim controls a monopoly in electricity distribution in Metro Manila and surrounding provinces and one member of the duopoly in mobile telecommunications (Smart Communications).

Or the other interpretation: the restrictions imposed by the constitution and our laws are so full of legal loopholes that all that a foreign investor wishing to invest in the Philippines has to do is to contract a good lawyer, or, as some say, a lawyer or law firm with strong political connections.

Sadly, the issue of Salim’s empire in the Philippines would muddle the debate over amending the constitution.

I have heard a conspiracy theory that with the weak legal basis for Salim’s control of utility and mining firms in the country, the solution would be to lobby for amending the constitution so that its existing restrictions on foreign ownership in these industries would be lifted, and the issue becomes moot.

What kind of country have we become?

A magnate in a foreign country which is in our level of development—Indonesia with a GDP per capita of $1.731 just a bit bigger than our $1,501—takes control of what are not only the prized gems of our corporate world, but also the most strategic of our industries.

We are the only country in the world in which a foreigner controls the biggest power company and the biggest telecommunications firm.

What an irony: Our restrictions on foreign investments have turned off global investors so much, that it explains partly why we are the smallest recipient of foreign capital in Asia, barring, of course Cambodia and Laos. Yet an Indonesian magnate of Chinese ethnicity—reputed to have ties with certain leaders of China has businesses in the mainland—controls our strategic industries.

The need to keep out of the public mind such obvious anomaly is probably what has prodded Salim to go into an industry that controls public opinion: Media. That topic in coming parts of this series.

Other parts of these series:

• Foreign ownership by Salim still a legal issue.

• So what if foreign owned? How the Salim conglomerate mobilizes Philippine savings to fund the empire. How its Philippine firms’ profits flow to Hong Kong, Indonesia, and ultimately to Salim’s tax-haven firms.

• The Salim Empire in the Philippines: From telecommunications to toll roads, electricity to the press, mining to medical center.

This Post Has One Comment

Comments are closed.