SM property businesses merged


SM Group, the business empire of tycoon Henry Sy Jr., has decided to merge its property businesses into one real-estate giant firm, with the surviving entity, SM Prime Holdings Inc., having the biggest market capitalization of about $14 billion in the country.

The boards of directors of SM Investments Corp. (SMIC) and SM Prime announced that they are consolidating property-related businesses of SMIC, under SM Prime, the Philippines’ leading shopping mall owner and operator.

SM Prime President Hans Sy said that the firm will have the biggest market capitalization in the country after the merger.

“Initially, the estimate is about $14-billion market capitalization,” SM Prime Chief Financial Officer Jeffrey Lim said, adding that the total transaction is valued at P279 billion.

Henry Sy Jr., SM Prime chairman, said that the integration of the group’s property businesses will give them scale, right organization, agility and resources to take advantage of the strong Philippine economy.

Lim added that the transaction will supply the group’s corporate structure, as well as further strengthen SM Prime’s asset base with higher cash flows.

In the enlarged SM Prime, the company will gain double revenues, 60-percent growth in net income, as well as eight times growth in its landbank.

From 110 hectares, the real-estate firm will have 920 hectares.

In a statement, SM Group specified that the proposed consolidation involves a series of steps.

“The first step consists of exchange offers for the outstanding shares of two listed entities: SM Development Corp. [SMDC], a residential developer in the Philippines; and Highlands Prime Inc. [HP], a developer of high-end residential properties within Tagaytay Highlands,” SM said.

The exchange offers are structured such that SM Land Inc., a privately held real-estate subsidiary of SMIC, will offer existing shares of SM Prime in exchange for the outstanding shares of SMDC and HP.

Following the completion of the exchange offers, the second step involves the merger of SM Land with SM Prime, with the latter as the surviving entity, while the third step involves SM Prime’s acquiring specific real-estate companies and assets currently held by SMIC in exchange for new shares in SM Prime.

The exchange offers for SMDC and HP by SM Land commences on June 4, and will remain open until July 9. SM Prime’s special stockholder meeting to approve the increase in its authorized capital stock for the merger of SM Land and acquisition of real-estate companies and assets from SMIC is scheduled to take place on July 10.

The consolidation is expected to be completed by the end of 2013, subject to regulatory and stockholder approvals.

For the taxes alone, SM will be spending around P6.5 billion for the whole transaction.


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