Venture to acquire RP's biggest shipping entity

(Updated 11:45 PM) MANILA, Philippines - A company jointly owned by Filipino, Dutch, and Kuwaiti investors will acquire the Aboitiz Transport Shipping Corp. (ATSC), the Philippines’ largest shipping company. The acquisition—seen to be completed next year when the shipping company turns 60 years old—will cover all units subsumed under ATSC. This includes the popular SuperFerry and SuperCat passenger vessels and 2Go, a sister company that transports goods on land and sea through the country’s Roll-On, Roll-Off (RoRo) system. “This is textbook synergy, enabling the [acquiring] company to eliminate redundant costs but not necessarily people," Sulficio O. Tagud Jr, Chairman and Chief Executive Officer of Negros Navigation Co. Inc. (Nenaco) told GMANews.TV. Nenaco is currently closely-held by Negros Holdings and Management Corp. (NMHC), which partly owns KGLI-NM Holdings Inc., the company that will acquire Aboitiz Transport. An estimated 40 percent of KGLI-NM is held by KGLIBV, a Dutch company. In turn, KGLIBV is beneficially owned by the KGL Investment Company (KGL Investment), a Kuwaiti company that secured approval in April to construct and manage an air transport cargo hub in Pampanga. The transaction will improve Nenaco’s ability to serve both passengers and shippers, allowing the company to offer more services to customers and widen its presence in all ports across the country. Passenger fares, shipping costs to stay the same despite synergy However, the company’s stronger presence across the archipelago may not immediately translate into cheaper fares nor lower shipping costs, Tagud clarified. “[Lower fares and shipping costs] is not yet on the plate," Tagud said. ATSC’s brands—SuperFerry, SuperCat, and 2Go—will stay the same although the Aboitiz name will be removed, Tagud said. On November 22, the buyer will inform the Aboitiz group whether or not it will proceed with the transaction. The sale is expected to be completed by January 15, 2009. The takeover only affects management while Aboitiz Transport’s rank and file employees will still keep their jobs, the company being acquired said. “[Aboitiz] family members will, over time, pass on the responsibilities to other people but the professional employees will remain in their current jobs," a senior Aboitiz official said. Next: RP’s sixteenth-richest family to leave shipping business RP’s sixteenth-richest family to leave shipping business For its part, the Aboitiz family—the Philippines’ sixteenth richest family last year—made the sale announcement through a disclosure to the Philippine Stock Exchange (PSE). Publicly-listed Aboitiz Equity Ventures, Inc. (AEV) is selling Aboitiz Transport as it aims to focus its resources on more profitable industries. In a PSE disclosure, AEV directors unanimously agreed to accept an unsolicited offer from KGLI-NM Holdings, Inc. to acquire the Aboitiz group’s 93.03 percent stake in ATSC. At P2.044 per share, the sale is estimated to yield P4.66 billion as AEV holds P1.889 billion while Aboitiz & Co., Inc., the family’s private holding firm, has 390.322 million Aboitiz Transport shares. “We felt that the price was reasonable," AEV Chief Operating Officer Erramon I. Aboitiz told reporters in a teleconference. He said the decision to sell was not affected by high oil costs nor increased competition from airlines offering cheaper fares. The sale will allow the Aboitizes “to deploy funds to other core businesses and hopefully end up in the long term with higher returns and growth," he said, adding that the transport unit is, “over the long term, possibly not" a strong source of profits. AEV is a major player in local power generation and distribution, and it has interests in food manufacturing and financial services. “We have lots of opportunities in power. We will continue to invest in it, but it does not mean we are not prepared to invest in other interests we are already involved in," Aboitiz said. Acquisition boosts shipping firm’s share prices An analyst said the impact of the Aboitiz Transport sale already reflected in the company’s shares. Aboitiz Transport shares jumped 39.07 percent to P1.90 apiece on Tuesday, close to the P2.044 selling price agreed between the Aboitizes and the buyers. “I think on the whole it’s a good development. [AEV] was able to sell at 40 percent above the market," Peter Raymond Lee of IGC Securities Inc. told GMANews.TV. The sale, which attracted foreign investors, indicate the domestic shipping industry’s potential despite challenges of high oil and increased competition from airlines, University of Asia and the Pacific economist Enrico Basilio told GMANews.TV. “We can see the restructuring of the industry. It is attractive if you know how to approach the sector. They have to know how to compete to survive and win," Basilio said. Aboitiz Transport’s top 100 preferred shareholders include Xavier Jose Aboitiz, AEV’s senior vice president; Jose L. Cuisia Jr., President and Chief Executive Officer of Philippine American Life Insurance Co; Union Bank of the Philippines, China Banking Corp., and the Meralco Pension Fund. with Robert JA Basilio Jr, GMANews.TV