• Subsidiaries not covered by disclosure rule



    JOSEPH Siy raised an interesting issue that can affect trading of a listed stock. In an email on March 10 to The Manila Times, he wrote about the lack of full disclosure on the sale by Glencore of a 62.5-percent controlling stake in Indophil-Sagittarius Mines Inc. in August-September last year, “despite the fact that this is material information.”

    Siy said he hoped ACR management would “disclose this information to the investing public.” ACR is the market symbol of Alsons Consolidated Inc.

    Siy, who I believe is both a trader and stockbroker, has a good point in questioning Alsons’ failure to disclose Glencore’s sale of its ownership participation in Sagittarius. It should have posted this on the website of the Philippine Stock Exchange.

    The question is, is Alsons under any obligation to make proper disclosure of the transactions of one of its units?

    In making the inquiry, Siy exposed the helplessness of the Securities and Exchange Commission in strictly implementing the rules on full disclosure of material facts that affect the prices of listed stocks.

    Unfortunately for him and other traders and public investors, neither the SEC nor the Philippine Stock Exchange can force listed companies to disclose the dealings of its unlisted subsidiaries.

    Being unlisted, Sagittarius is not covered by the full disclosure rule, which is not consistent with the market’s policy of transparency. That can only be corrected by amending the rules.

    Ownership profile
    The Alcantaras own Alsons as indirect stockholders. Three of their companies own a combined 5.031 billion ACR shares, or 79.97 percent. These are Alsons Corp., with 2.593 billion shares, or 41.21 percent; Alsons Power Holdings Inc., 1.25 billion shares, or 19.87 percent; and Alsons Development & Investment Corp., 1.189 billion shares, or 18.89 percent.

    The remaining ACR shares, which number about 1.26 billion, representing a 20.02 percent stake, are held by the public. (The percentage may not add up to 100 percent because of the rounding off of numbers.)

    It is true, as Siy claimed, that the PSE website did not have anything posted in connection with Glencore’s sale of its holdings in Indophil-Sagittarius. However, it did have Alsons’ audited financial report, which, in turn, explained the Alcantaras’ acquisition of “Indophil issued shares not already owned by APIC,” which perhaps included Glencore’s holdings.

    Indophil has a substantial stake of 37.5 percent in Sagittarius, according to the company’s website.

    The acronym APIC stands for Alsons Prime Investments Corp., which Alsons Power Holdings Corp. (APHC) formed on Dec. 26, 2011 “as a wholly owned subsidiary to primarily hold the Indophil investment.” As a member of the Alsons group, APIC ended up holding for the group 207.708 million Indophil shares, or 17.26 percent.

    Non-disclosed units
    While APHC is “also a company under the Alcantara Group,” it is not listed among ACR’s subsidiaries in a financial filing. The same is true with its unit, APIC. Instead, APHC appeared in a PSE posting among ACR’s “investment acquisitions.”

    As disclosed in Alsons’ financial filing, APIC has offered to buy out on Sept. 23, 2014 its stockholders, which probably included Glencore, of Indophil shares at A$0.30 per share.

    With its acquisition of additional Indophil shares, APIC increased its holdings to 97.27 percent from 17.26 percent. As a result, Alsons added Indophil to the group as a 100-percent owned unit in January 2015.

    Alsons, or ACR, initially owned 29.14 million Indophil shares, acquired for P1.316 billion, or P45.16 per share, on Dec. 23, 2010. It bought 207.708 million Indophil shares which APIC held for the group. At A$0.30 per share, the acquisition cost the Alcantaras A$62.312 million, or P2.187 billion at a current exchange rate of P35.0921 per Australian dollar.

    Adding up, the Alcantaras spent P3.503 billion on acquiring 29.14 million Indophil shares in 2010 and 207.708 million Indophil shares in 2011.

    Here is an assumption of numbers: If Indophil had 1.203 billion outstanding shares, of which the Alcantaras indirectly owned 236.848 million before they offered to buy at A$0.30 each the remaining shares they did not own yet, this would mean they still had to buy 966.152 million Indophil shares to complete a 100-percent takeover.

    At A$0.30, the Alcantaras paid A$289.846 million, or P10.171 billion, for the remaining 966.152 million Indophil outstanding shares that it did not yet own.

    Alsons’ capital stock has par value of P1 per share, which opened trading on March 21 at P1.46, hit a high of P1.47 and closed at the session’s low of P1.45.

    Note: With so many unknowns, Duediligencer relied on assumptions and made computations to arrive at certain numbers. One way was getting the number of outstanding shares that Indophil, an Australian company, had on the date of the transactions with Alsons.



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    1 Comment

    1. The Indophil-,Saguitarrius Mines Inc ownership of the $ 590 M Tampakano Mines or Php 28 B peso mines X 2.42 % ownership by Alsons Consolidated Resources Corp. (ACR) = Php 700 M or roughly 12% of the entire ACR capitalization of Php 6.295 B under the equity acctg method is so material that it is imperative should be disclosed to the investing public