P10 BILLION OPTION TO BUY GMA NETWORK HOVERS THE CORPORATE WORLD!

THERE is a buzz going the rounds of financial executives regarding the offer of a possible buy-in into GMA 7 network of a big conglomerate that could alter the media industry’s landscape in the country. The buzz about the planned buy-in was reportedly sparked by the payment of the conglomerate of P10 billion.

The reports gained traction with the pronouncement earlier of GMA 7 top honcho Felipe Gozon that another conglomerate, outside of the group of Manny V. Pangilinan, is interested in the network. The MVP group is said to have offered between P40 billion and P45 billion for the company.

The P10-billion down payment could take the form of an option to buy, with an exercise date that could be agreed upon by the buying and selling parties, the latter being the triumvirate that controls the network: the Gozons, the Duavits and the Jimenezes.

The price-earnings (PE) ratio for GMA7, now hovering at 28.16, could triple, which means that the buyer would have to push the network’s earnings three times more or come up with a winning formula for a better profit picture for the company once the network is acquired. The PE multiple is a yardstick that investors use in determining whether a stock is worth investing in.  It is arrived at by having the stock’s market price divided by the earnings per share. The lower the PE multiple, the better the investor’s chances at making money.

In comparison, the PE multiple of Union Bank of the Philippines at its present price of P98 is 9.71; San Miguel Corp. at P112 has a PE of 22.72; Philippine Long Distance Telephone Co. at P2,340 has a PE of 14.41; Ayala Land at P19.26 is 35.02; and Petron Corp. at P10.24 is 13.00.

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