How SM Investments acquired stake in 2GO

MANILA, Philippines – The country's most valuable listed company, SM Investments Corporation (SMIC), revealed how it acquired a substantial stake in the Philippines' largest logistics provider 2GO Group Incorporated.

The Sy family-led conglomerate disclosed to the Philippine Stock Exchange (PSE) on Tuesday, April 4, that it paid $124.50 million for a 34.5% stake in 2GO's parent company, Negros Navigation Company Incorporated (NENACO). 

NENACO owned an 88.91% stake in 2GO, while the remaining shares are in the hands of public investors. For SMIC, the acquisition was priced at "fair market value."

Before the acquisition, NENACO was 60% owned by KGLI-NM Holdings Incorporated, which is a firm owned by Tagud family-led Negros Holdings Management Corporation (NHMC) (60%), Dennis Uy-led Udenna Investments (31%), and Kuwaiti Gulf Link Investments (around 9%). The remaining 40% of NENACO was in the hands of China-ASEAN Marine BV.

SMIC then bought a 34.5% stake in NENACO through China-ASEAN Marine. After the deal, China-ASEAN Marine is now left with a 5.5% stake in 2GO's parent firm.

The 2GO group was formerly part of the Aboitiz conglomerate and was known as Aboitiz Transport Corporation, having grown from the original Superferry brand. Aboitiz Equity Ventures sold the unit to NENACO in 2010 for $81 million.

Emergence of e-commerce

SURGE. After the announcement of the deal, 2GO shares surge to P14 apiece on April 3, 2017. Screenshot from PSE website

SURGE. After the announcement of the deal, 2GO shares surge to P14 apiece on April 3, 2017.

Screenshot from PSE website

The acquisition is part of SMIC's strategy to address the emergence of e-commerce, which is threatening malls' foot traffic. The SM group is the largest retailer in the Philippines through its network of 60 SM malls across the Philippines and 7 in China as of end-2016.

SMIC has taken tentative steps into e-commerce in the past through a partnership with online platform Lazada to sell products from the SM Store.

SM's rival Ayala Corporation has also made moves of its own into e-commerce by acquiring online fashion platform Zalora, in a bid to create online and offline retailing synergies.

"We are pleased with this opportunity to invest in a fast growing, dynamic logistics business. It will benefit from, as well as contribute to the country's economic progress especially as development spreads to the provinces," SMIC president Harley Sy said in a disclosure last Friday, March 31.

On Monday, April 3, shares of 2GO went up to P14 each from Friday's P9.50.

Asked about the unusual trading movement, 2GO told the local bourse it is "not aware of any information that could have triggered the unusual price movement of 2GO shares traded in the Philippine Stock Exchange."

"We can only assume that such price movement was due to market speculation by the trading public," the company added.

2GO's market capitalization as of Tuesday is P34.24 billion.

SMIC subsidiary SM Prime Holdings Incorporated, meanwhile, was the most active stock on Monday, closing 1.41% higher at P28.70 apiece. – Rappler.com