Poison Pill and What the Lopez–Razon Deal Teaches Us About Power and Fine Print

In big business, danger often hides in the fine print.

Deep inside the contracts for a multibillion‑peso hydropower deal between First Gen and Ricky Razon’s Prime Infrastructure is one such line: a clause that could wipe out around ₱23.5 billion from First Gen’s books if a particular set of people are removed from power. It has a dramatic nickname—the “poison pill”—and it now sits at the center of a family war among the Lopezes.

Simply put, the clause ties the fate of the deal to one man: Federico “Piki” Lopez.

First Gen is the Lopez group’s main power company listed on the stock exchange. It runs big gas, geothermal, hydro, wind and solar plants. First Philippine Holdings is the listed parent that owns and controls First Gen; it is the family’s main energy and infrastructure holding firm.

Prime Infra, meanwhile, is a private company led by Razon that focuses on large projects like power and water. Recently, First Gen and Prime Infra announced two big moves: First Gen sold control of its Batangas gas plants to Prime Infra for about P50 billion, and then agreed to invest roughly P62 billion for a 33-percent share in Prime Infra’s pumped‑storage hydropower projects in Wawa, Rizal and Pakil, Laguna. Prime Infra kept the remaining 67 percent and control of those hydro assets. These are the assets sitting behind the poison pill.

First Gen’s own April 14, 2026 clarification to the Philippine Stock Exchange explains what the clause does. If there is a “Change of Management Control” at First Gen during the construction of the Wawa and Pakil projects and up to one year after they begin commercial operations, Prime Infra can require First Gen to sell its shares in Razon-led Prime Hydropower Energy Inc. (PHEI) to Prime Infra at a 25 percent discount to the agreed purchase price. First Gen estimates that this 25 percent discount on its hydropower stake would cost it approximately P15.5 billion. The same clarification says that if Prime Infra uses that right over the hydro shares, it may also require First Gen to sell its remaining shares in the gas plants to Prime Infra at the same 25 percent discount, which First Gen quantifies at approximately P8 billion. Put together, the company itself says the total “exposure” from this change‑of‑management clause is about P23.5 billion.

The trigger is written very specifically around Piki and people he approves. A “Change of Management Control” happens, among other cases, if he or his designee is no longer CEO of First Gen, if the members of the executive committee are no longer his designees, if his designees no longer make up a majority of the First Gen board, if he is no longer a director of First Philippine Holdings, if he or his designees are no longer First Gen directors in PHEI, or if he is no longer the proxy who votes all of First Gen’s shares in the hydro project companies. The clarification defines a “Designee” as someone he confirms in writing as acceptable for those roles. This means the clause is not only about him personally. It protects a whole pattern of control: his titles, his board majority, his executive committee and his project‑company seats. Change that pattern during the protected period, and Prime Infra gains the right to buy First Gen out at a discount.

From Prime Infra’s viewpoint, this can be described in simple terms. It is putting big money into long, risky projects. It wants to be sure that the partner it knows and trusts today will still be there while the dams are being built and tested. If the Lopez family suddenly swaps out the people Prime Infra signed up to work with, it wants the right to reset the deal by buying First Gen’s stake more cheaply. First Gen’s clarification says these “contractual arrangements were requested by Prime Infra” and presents them as a sign of the trust and confidence Prime Infra has in Federico R. Lopez and his management team. In short: “We trust this team. If you change them in mid‑project, we get to redo the deal.”

From Piki’s side, agreeing to this fits his own story about leadership. He has tried to position himself as the cousin who will make hard choices to keep the Lopez business group strong: selling down some assets, partnering with outside capital, and focusing on where the Lopez group has an edge. Letting Prime Infra write his presence and his designees into the contract underlines that the Razon–Lopez energy alliance rests on his stewardship. If he is removed while the clause is active, the company faces a large financial hit.

Gabby Lopez and the other cousins at Lopez Inc. see the same clause very differently. Gabby, a former ABS‑CBN chairman, now leads the bloc of cousins who are stockholders in the private holding firm Lopez Inc., and it is this group that is formally questioning the poison pill. For them, the numbers in the clarification—a 25 percent discount worth around P15.5 billion on hydro and P8 billion on gas—look like a price tag on their right to change leaders. They may accept that Prime Infra wants continuity. But they also see that if they push through with replacing Piki and his designees during the specified period, First Gen may be forced to sell valuable assets at a quarter off. That loss will be borne by the company and its shareholders, not by Piki personally. To Gabby and his cousins at Lopez Inc., the clause turns a governance decision into a very expensive gamble.

This is where broader governance debates come in, and where the First Gen case becomes a useful example.

When poison pills were first invented in the United States in the 1980s, they were aimed at “corporate raiders” — outsiders trying to seize control by buying up shares and launching hostile takeovers. A classic poison pill worked like this: if a raider bought more than a set percentage of shares, all the other shareholders got the right to buy new shares at a big discount. That would dilute the raider and make the takeover much more costly, forcing them either to back off or to negotiate better terms. In many cases, this bought boards time to look for other bidders or to push for a higher price. Used that way, the tool was seen as protecting all shareholders.

Over time, though, investors and courts noticed that boards could also use poison pills to protect themselves. If a pill was so strong that no bidder could realistically succeed, or if it was kept in place even when shareholders wanted to tender their shares, it stopped being a shield for investors and became a wall around management. That triggered reforms. In markets like the US and Japan, boards were pushed to make pills time‑limited, to seek shareholder approval for strong defenses, and to explain clearly how these tools served the interests of all shareholders, not just insiders.

The 2022 fight between Elon Musk and Twitter is one modern example. When Musk started buying large chunks of Twitter stock and made an unsolicited offer, Twitter’s board adopted a poison pill that would allow other shareholders to buy shares cheaply if anyone went over a certain stake. The idea was to slow him down and force a negotiation. In the end, the pill was only temporary; it gave the board leverage and time, but did not permanently block a deal. Musk and the board eventually agreed on a price, and shareholders got a chance to vote. Some investors thought the pill helped secure a better outcome. Others thought it just delayed the inevitable. But the key point is that the pill was framed as a way to get a fairer deal for shareholders, not as a way to make one CEO impossible to remove.

In Japan, there were cases where companies tried to use poison pills to shut out activist funds. Courts began to look closely at whether the pills were adopted properly and whether they answered a real threat. In one case, the Supreme Court effectively struck down a pill that had been rushed through. This contributed to a trend where strong pills are being scaled back or dropped, and companies rely more on transparent talk with investors and formal votes to handle takeovers and challenges.

Closer to home, Philippine governance standards and investor guidelines have been moving in a similar direction, even if there have been fewer headline cases. The SEC’s Code of Corporate Governance for Publicly Listed Companies and the Philippine Stock Exchange’s manual both stress that boards must treat all shareholders fairly and must disclose important risks and terms clearly and on time. Legal writers who study corporate takeovers here point out that any defensive measure, such as strong voting rules or rights that make takeovers harder, must be used in good faith, respond to genuine threats, and be proportionate. They caution against measures that mainly keep existing insiders in control. Global proxy advisers like Glass Lewis, whose policies many local funds follow, say boards should not quietly adopt powerful anti‑takeover tools without getting shareholders’ approval and should avoid devices that unfairly limit shareholders’ choices.

Seen against that backdrop, the First Gen–Prime Infra clause raises simple but important questions. Does it mainly protect a long‑term, risky partnership, by making sure the team that signed the deal stays in place while the projects are being built? Or does it mainly protect one leader and his circle, by making their removal during that period very expensive for everyone else? Was the clause clearly explained and approved at the board level, including by independent directors? Was it disclosed in a way that ordinary investors could understand and factor into their decisions?

The answers will vary depending on whom you ask. Prime Infra can say it is just guarding its investment and its lenders. Piki can say he is aligning his own fate with the fate of big projects that matter for the country’s power supply. Gabby and his cousins at Lopez Inc. can say the clause makes it too costly for owners to change leaders, even if they believe that is what the group needs. Regulators and governance watchers will focus less on family motives and more on whether the process, disclosure and balance between protection and entrenchment meet today’s standards.

This case shows how an old tool like the poison pill can evolve. In the 1980s, it was a way to scare off raiders. Today, it can appear inside a joint‑venture contract between partners, written around a single name and his designees, and combined with complex family dynamics. In Manila as in New York or Tokyo, the same question keeps coming up: when a few lines of fine print can move billions, whose interests should they be written to protect, and who gets to decide?

For now, it stands as a reminder that in modern capitalism, the most explosive conflicts are often written not in headlines, but in clauses.