The share price of Manila Electric Co.  ( Meralco) fell below the P200 level  as investors booked profits after the Lopez family  rejected the offer of Henry Sy Jr’s TriRatna Holdings Corp., and securing for  the group of  Manuel V. Pangilinan  a decisive stake in the power distributor.

Lopez-led First Philippine Holdings Corp. said Pangilinan’s Metro Pacific Investments Corp. exercised its right of first refusal, matching TriRatna’s offer of P300 per share for half or 6.7 percent of the Lopez’s 13.4-percent stake.

 Meralco  shed 12.22 percent to end  Friday’s session at P  194 while total of 1.05 million shares were traded valued at P213.45 million.

 Other parties involved in the deal also saw their share price drop as the prospects of a bidding war for control of Meralco grew dim after the announcement.

First Holdings, which owns the Lopez family’s Meralco shares,  fell 3.45 percent to P56 yesterday.  Over 7.59  millions shares were traded worth P 425.77 million. The stock had jumped significantly since TriRatna’s offer on October 30, touching a high of P58 per share, its most in a year, before the company ruled in favor of Metro Pacific. 

Maria Arlysa E. Narciso of AB Capital Securities Inc. said that the decline could be credited to profit taking.

She noted that Meralco and First Holdings benefited the most from the surprise offer of TriRatna this week, and that some investors pulled back now that the excitement has subsided.

After it acquires the 6.7 percent stake, Pangilinan’s group, which  currently controls 34.7 percent of Meralco through Metro Pacific and Philippine Long Distance Telephone Co. will increase its holdings  to 41.4 percent making the group the single biggest voting bloc in Meralco. 

This latest development will allow Pangilinan to pull ahead of San Miguel Corp., which has expressed interest in the Lopez shares, and is the direct owner of  27 percent in the power retailer.

Meanwhile, Metro Pacific also lost 4.76 percent to end at P3.00 apiece, after the firm said it would match TriRatna’s offer, a figure higher than the infrastructure company had originally intended to pay.

At P300 per share, the 6.7 percent  Meralco stake will cost P22.4 billion. This is also a significant premium over Meralco’s closing price of P221 on Thursday, when the First Holdings' decision was announced.

Under the deal, Metro Pacific will lend First Holdings P11.2 billion, which the latter will use to pay off its debts. First Holdings will guarantee the loan with its shares in Meralco and First Gen. The loan carries an interest rate of 5 percent per annum and will mature on March 31, 2010.

To fund the loan, Metro Pacific said in a disclosure on Friday that it issue up to P12 billion 9-year fixed rate corporate notes in one or more tranches. Metro Pacific said the notes will  be secured by over 163.6 million of its Meralco shares.

In exchange for the loan,  First Holdings will grant Metro Pacific a call option which will commence no later than January 15. A call option gives Metro Pacific the right but not the obligation to buy the Meralco shares until the option period ends on March 31, 2010.  

If Metro Pacific fully exercises this option next year, it will have to pay First Holdings the full P22.4 billion for its Meralco shares.