Andrew Tan’s investment

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perez

Ownership profile.Global-Estate Resorts Inc. (GERI) has an authorized capital of 10 billion shares with par value of P1 per share. With 8.468 billion shares of its capital already paid-up, the company has 1.532 billion shares that remain unissued.

Of GERI’s 8.468 billion issued and outstanding shares, Alliance Global Group Inc. (AGGI) owns 5.405 billion, or 63.693 percent. PCD Nominee Corp. holds 1.397 billion shares, or 16.49 percent, for Filipinos, and 457.878 million shares, or 5.407 percent for foreigners. The Sobrepeñas, who used to be the majority stockholders of Fil-Estate group until the takeover by businessman Andrew Tan, owns 1.113 billion shares, or 13.143 percent, which are held by Fil-Estate Management Inc.

Dilution. With his P5.65-billion acquisition of additional 2.50 billion GERI shares at P2.26 each through Megaworld Corp., businessman Andrew Tan will tighten his majority ownership in GERI. His AGGI already owns 5.405 billion GERI shares, or 63.693 percent of 8.486 billion outstanding. Including new comer Megaworld’s 2.50 billion shares, the two companies combine for 7.905 billion shares, or 72.073 percent of the resulting 10.968 billion issued and outstanding GERI shares.

Since only Megaworld will be the only subscriber to new GERI shares, the A. Tan group will effectively dilute the Sobrepeña-owned Fil-Estate Management to 10.148 percent from 13.820 percent.

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The dilution of the Filipino-foreign publicly owned GERI shares to 16.347 percent from 21.125 percent will result from outsiders not exercising their preemptive right to shares offering because Tan makes them unattractive by paying more than what he should. Besides, as the controlling stockholder, he did not make the stock offerings available to all.

Higher than market. Even if GERI has offered them shares, the beneficial owners of the company shares lodged with PCD Nominee would more likely not buy them for having been priced higher than market. Megaworld was to pay P2.26 for each of 2.50 billion new GERI shares.

On Friday, GERI hit a high of P1.85, the stock’s opening, fell to a low of P1.77 and closed trading at P1.80. It climbed to a 30-day high of P2.54 on May 14 and dropped to a month’s low of P1.76 on June 13.

Megaworld’s acquisition of 2.50 billion GERI shares would not take effect immediately because Global Estate has only 1.532 billion shares remaining of its 10 billion authorized capital stock. It will have to wait for the implementation of GERI’s capital stock’s expansion approved in 2011 to 20 billion shares, which has yet to be submitted for approval by the Securities and Exchange Commission.

Lucky patriarch. Businessman Andrew Tan is probably the luckiest patriarch of a fast-growing conglomerate. He may be paying P1.26 higher than par and 25.56 percent over Friday’s close of P1.80. But at the price per share of his additional acquisition, he may again end up ahead of market as he has been in his past subscriptions.

In December 2010, Tan subscribed to 5 billion GERI shares at P1 par value. By the first quarter of 2011, the stock peaked at P1.93 and even surged to P2.45 in September. At these prices, his P5-billion-GERI shares had market value of P9.65 billion and P12.25 billion, respectively.

All this represents only paper gain for Tan because he was not, has not been, and is not selling.

GERI has gone a long way from one whose stock used to trade at P0.35 way back in the first quarter of 2010 to P0.93 in the fourth quarter of the same year.

P1.26 billion in Empire East. Megaworld Corp. will also invest P1.26 billion in 1.2 billion new shares at P1.05 per share in Empire East Land Holdings Inc. to bring to P6.91 billion its additional investments in two subsidiaries.

The new shares will increase Megaworld-owned Empire East shares to 11.817 billion, or 80.516 percent of the resulting 14.676 billion outstanding shares.

Megaworld now controls 78.781 percent of its preexpansion 13.476 billion outstanding shares.

Computed on Empire East’s 14.676 billion expanded outstanding shares, the percentage equivalent of Filipino-owned 1.781 billion Empire East shares lodged with PCD Nominee Corp. would drop to 12.133 percent from 13.214 percent of 13.476 billion outstanding shares.

esdperez@gmail.com

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