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SM Group approves merger of companies

By Jenniffer B. Austria | Posted on Jun. 01, 2013 at 12:02am |
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Billionaire Henry Sy is merging its property units and assets under SM Prime Holdings Inc. in a move to create country’s largest property firm with a market capitalization of $14 billion (P588 billion).
SM Investments Corp. and SM Prime Holdings Inc. said in separate disclosures to the stock exchange their respective boards of directors approved the merger via share swap transaction.
The group said under the plan, SM Land, the private property unit of the Sy family, would offer existing SM Prime shares for the outstanding stocks of listed SM Development Corp. and Highlands Prime Inc.
The group said after the completion of the exchange offers, the second step involved the merger of SM Land with SM Prime, with the latter as the surviving entity.
Henry Sy Jr., who will become chairman of the merged entity, said the consolidation aimed to create an integrated real estate company, which would allow the merged entity to undertake larger projects.
“The consolidation will give us the scale, the right organization, the agility and resources that will allow us to participate in highly attractive opportunities that go with stronger macroeconomic environment,” Sy Jr. said.
SMDC is the real estate unit of SMIC while HPI is a developer of high-end properties within Tagaytay Highlands. Both companies will be delisted from the stock exchange following the merger.
SM Prime, the largest shopping mall operator, is poised to surpass Ayala Land Inc.’s P465.6-billion ($11 billion) market capitalization. The move will also allow SM Prime to pursue bigger projects, backed by the group’s experience in developing malls, homes, offices and resorts, it said.
“This consolidation is clearly intended to rationalize the group’s property business,” James Lago, head of research at PCCI Securities Brokers Corp., said before the announcement. “On the one hand, you have property sales that are explosive and volatile and rental income, at the other, which is steady and predictable.”
SM Investments, SM Prime, SM Development and Highlands sought a trading halt Friday. Trading of Sy-owned stocks would resume Monday.
SM Prime said it would acquire specific real estate companies and assets currently held by SMIC in exchange for new shares in SM Prime. One of the assets to be acquired is the 60-hectare Mall of Asia complex in Pasay City.
SM Prime chief finance officer Jeffrey Lim said in a presentation the consolidation would boost the company’s landbank to 920 hectares from 110 hectares while assets would increase to P284 billion from P148 billion. 

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