First Philippine Holdings Corporation (FPHC) has executed an option agreement with Rightlight Holdings Inc. (RHI), which holds the Manila Electric Company (Meralco) shares of Metro Pacific Investments Corporation and Pilipino Telephone Corporation.

The agreement gives Rightlight, which will later be renamed Beacon Electric Asset Holdings Inc., over FPHC's 74.7 million Meralco shares or 6.6 percent of the total outstanding common shares in Meralco.

The Option Shares will be exercisable at the option of RHI from March 15 to May 15, 2010. The exercise price will be P300 per share or a total of P22.41 billion.

Through an Omnibus Agreement, First Holdings has also consented to the rights assignment by MPIC and Piltel to RHI over MPIC and Piltel's rights in their respective Meralco common shares.

Under the terms of the Omnibus Agreement, First Holdings will be assigned with property dividends with respect to the Rockwell Land Corporation shares of Meralco that may be declared and distributed.

With respect to the Option Shares, the rights to be acquired by RHI shall also exclude shares in Rockwell that may be declared and distributed by Meralco as property dividends.

Under the Omnibus Agreement, MPIC and Piltel will consolidate 163.6 million and 154.2 million of their Meralco common shares, respectively, into Beacon Electric, thus giving Beacon Electric a 28.2 percent interest in Meralco and making it the single, largest shareholder of Meralco.

Piltel may later transfer to Beacon Electric its remaining 68.8 million Meralco common shares.

An exercise of the Call Option will increase Beacon Electric’s Meralco shareholdings from 28.2 percent to 34.8 percdent which will result in a combined Meralco shareholding of Beacon Electric and Piltel of 40.9 percent.

The consolidation of the MPIC and Piltel holdings in Meralco will also allow Beacon Electric to access debt financing for any additional purchases of Meralco shares, using its Meralco shares as security.

Each of MPIC and Piltel has agreed to subscribe to 1.16 million common shares of Beacon Electric for a subscription price of P23.13 billion and has agreed that the resulting equity of MPIC and Piltel after such subscription shall be 50 percent each of Beacon Electric.