Buying sprees and backdoor listings
Amid the wildfire decimating market gains are the quiet but bold buying and backdoor listing activities that may lend to interesting stock plays in the not so distant future.
The most recent of these financial transactions, which are labelled broadly under mergers and acquisitions (M&A) activities, is the purchase by Davao-based businessman Dennis Uy (through his Udenna Corp.) of 70 percent stake in Conti’s Holdings Corp. (CHC), the owner and operator of Conti’s Bakeshop and Restaurant chain.
The acquisition ushers Uy’s Udenna Corp. into the food industry at the same time brings synergies into its existing portfolio in hospitality and tourism, and in previously acquired related food retail formats such as Enderun Colleges, which specializes on hospitality management and culinary arts courses and the Philippine
“FamilyMart,” which operates the local franchise of the Japanese convenience store brand (purchased from the Ayala and Tantoco groups).
The Philippine food service industry is reportedly about $7.2 billion and has been growing with an annual growth rate of 15 to 20 percent.
Details of the financial deal are yet to be disclosed but it is expected the transaction will be completed next month.
Already under the umbrella of Udenna Corp. are distribution and retailing petroleum products company Phoenix Petroleum Philippines, Inc., shipping and logistics firm Chelsea Logistics Holdings Corp., real estate outfit Udenna Development, and infrastructure concern Udenna Infrastructure, among others.
Phoenix Petroleum and Chelsea Logistics are listed on the stock exchange under the trading symbols of PNX and CLC, respectively.
Earlier in June, Udenna acquired, also through backdoor listing, at least 62 percent of the issued and outstanding shares of listed company Philippine H2O Ventures Corp. (with the trading symbol of H2O) as its vehicle into tourism-related business, following the change in the name of H2O into PH Resorts Group Holdings, Inc. (PH Resorts) and its primary purpose to engage in the hotel and/or gaming and entertainment business.
PH Resorts now houses the tourism-related businesses of the Udenna Group, which includes two integrated resort and casino projects in Mactan, Cebu as well as in Clark Global City in Angeles, Pampanga.
Earlier this year, too, Udenna got approval from the Philippine Competition Commission (PCC), the antitrust agency, for its merger with KGL Investment BV (KGLI-BV), a private limited liability company under KGL Investment Cooperatief UA based in the Netherlands that indirectly holds a stake in 2GO Inc.’s parent firm, after it complied with the commission’s demands.
To recall, the PCC previously nullified Udenna’s purchase of the entire outstanding capital stock of KGLI-BV and imposed a P19.6-million fine as the deal was finalized without clearance from the commission.
In August 2016, Udenna bought all of KGL Investment Coöperatief UA’s shares in KGLI-BV, which in turn owned 39.71 percent of KGLI-NM Holdings Inc. KGLI-NM Holdings is a Filipino firm that owns about 60 percent of 2GO parent firm Negros Navigation Company Inc.
Under Republic Act (RA) No. 10667, also known as the Philippine Competition Act (PCA), the PCC should be notified for merger and acquisition deals with transaction values above P2 billion before the deal is sealed.
As per section 17 of the PCA, parties who fail to notify the PCC of a transaction that meets the threshold would face “a fine ranging from one to five percent of the transaction value and their business deal would be voided.”
Last week, too, Asiabest Group International, Inc.’s (ABG) share price ended as the exchange’s third top gainer.
As it turned out in a disclosure by the company last Tuesday (Sept. 11), Hongkong-based Tiger Resort Asia Ltd. (TRAL), the majority shareholder of Okada Manila, was “buying 200 million common shares for P647.5 million” (equivalent to P3.2325 per share) of ABG’s shares to enable TRAL make a backdoor listing on the local exchange.
The purchase will likewise mean acquiring two-thirds of ABG’s present outstanding capital stock and will be done by way of special block sale through the exchange “on Nov. 12, 2018 or at a date mutually agreed upon by the parties.”
First three days of Week 28
Only Pixiu was active in the first three days of Week 28, covering the period Sept. 10 to 14, 2018.
First thing Monday morning (Sept. 10), she had the following “buy” trading orders: 6,000 shares of Emperador Inc. (EMP) at P7.30; 8,000 shares of Petron Corp. (PCOR) at P8.96; 50,000 shares of Transpacific Broadband Group International, Inc. (TBGI) at P0.60; and 3,000,000 shares of The Philodrill Corp. (OV) at P0.011 apiece.
Luckily for her, all of her “buy” orders made good except in the case of OV, which was a little lower than the day’s prices.
Pixiu came up with three trading orders the following day, Tuesday (Sept. 11), namely: to sell 50,000 shares of TBGI at P0.62 per share and to buy 20,000,000 shares of Abra Mining & Industrial Corp. (AR) at P0.0024 and to buy 3,000,000 shares of OV at P0.011 apiece.
She was successful with her two “buy” orders but was not with her move to dispose her shareholdings in TBGI.
Bottom line
Simply, backdoor listing is the practice of an unlisted company securing an exchange listing by merging with a company that is already listed on the exchange.
The terms “reverse takeover, reverse IPO, or reverse merger” have the same meaning as backdoor listing.
Backdoor listing has usually led to interesting stock plays. Hopefully, the recent transactions will give the market a good treat in the coming days.
Den Somera is a licensed stockbroker. The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity. E-mail address of the writer is den.somera@manilatimes.net
The post Buying sprees and backdoor listings appeared first on The Manila Times Online.