The billion-peso wealth of Zobel brothers

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Emeterio Sd. Perez

Emeterio Sd. Perez

JAIME Augusto Miranda Zobel de Ayala is chairman of the board and CEO of Ayala Corp. (AC). Fernando, his younger brother, is vice chairman, president and chief operating officer.

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Being significant stockholders of the Ayala group of companies through an unlisted holding company, Jaime and Fernando are among AC’s five highest paid executives. Their huge compensation earned them each a slot in BIR’s top 500 taxpayers.

In its 2014 list, the Bureau of Internal Revenue ranked Jaime No. 23 and Fernando No. 25 with tax payments of P37,465,927 and P34,724,295, respectively.

Incidentally or not, the BIR either forgot to include the total incomes of the rich (but may not all be necessarily famous) or intentionally omitted them. Nobody knows why.

Taxable income
Following BIR’s suggested formula, Duediligencer did a series of computations with the following results: Jaime’s tax payment was based on his taxable income of P117,190,396 and Fernando’s on P108,123,296. The pay scale should make Jaime, being older, P9,067,099 better paid than Fernando.

The question that may be asked is why boxing champion Emmanuel Dapidran Pacquiao paid more taxes than the Zobel brothers did even if their taxable incomes were combined.

Pacquiao’s tax payment of P210,305,927 in 2014 was three times the Zobel brothers’ combined taxes of P72,190,222. The amount ranked him No. 2 among BIR’s top 500 taxpayers that year.

Even Kris Aquino, the actress sister of the former temporary chief occupant of Malacanang, paid a much bigger tax than either of the Zobel brothers. For 2014, she paid P54,530,635, which placed her at No. 6 in BIR’s list. Her tax payment was based on an estimated taxable income of P170,517,609.

Compensation income
The next poser would be whether or not tax payments make one richer than others. If in 2014, Pacquiao, who is now a senator, was No. 2 among the top 500 taxpayers and Aquino was No. 6, do their rankings make them richer than the Zobel brothers, or either of them?

Of course not. The BIR’s ranking is based on compensation, which means Jaime and Fernando received only that much in 2014 and paid the appropriate taxes. But their tax payments do not make them less rich because they are not taxed for their other income such as dividends either in cash of in stock.

From the layers of ownerships, it is easy to compute the other income of the Zobel brothers. They receive dividends from the unlisted Mermac Inc., which is AC’s majority stockholder.

In turn, under AC are various listed units and associates among which are Ayala Land Inc., Globe Telecom Inc., Bank of Philippine Islands and Integrated Micro-Electronics Inc.

Mermac owns 303,689,196 AC common shares with P50 par value and 159,577,460 voting preferred shares with P1 par value. Based on par value, it had paper wealth of P15,344,037,260.

Paper wealth
As of 2013, Mermac had 7,565,243 outstanding shares of which seven million were Class B shares. Of the Class B shares, which had par value of P1 each, Jaime and Fernando owned 2.275 million shares each.

As AC’s majority stockholder, Mermac owned—and still own today—303.689 million AC common shares, an ownership that would give the Zobels paper wealth of P260,717,174,766 at the stock’s closing price of P858.50 on Monday. Divided among Mermac’s 19 stockholders, each would “own” P13,721,956,566.

Of course, the estimate of the Zobels paper wealth resulted from a computation assuming that all of Mermac’s 19 stockholders—some of them corporate but owned by the other Zobels—held equal number of shares.

The stock’s 52-week high of P908 would make the Zobels even much richer in paper with combined wealth of P275,749,789,968. At this market value, each of Mermac’s 19 stockholders would be richer by P14,513,146,840 in paper wealth.

Mermac dividend
Jaime and Fernando do not directly receive dividends from AC but from Mermac. They are entitled to AC dividends only for what’s due their directly owned AC common shares—and preferred shares if they own any.
Instead, the Zobel brothers, like the other members of the Zobel family, wait for Mermac to pile up its retained earnings that would enable it to meet the dividend payments.

For instance, on Aug. 13, 2013, it distributed as dividend P718.57 million of its retained earnings—P1,381 per Class A shares, and P9.67 million or P1.38 per Class B shares.

After these dividend payments, Mermac reported retained earnings of P675,308,165 as of Dec. 31, 2013.
On Jan. 6, 2014, Mermac paid similar dividends to the previous issue and followed it up with 30 percent stock dividend on Feb. 3, 2014.

Still richer
To the question why Aquino and Pacquiao paid more income taxes than either Jaime or Fernando, here is the answer: As actress entertainer, Aquino is a popular and much-in-demand product endorser. The same with Pacquiao. His face is very much visible with China-made cellular phones.

On the other hand, Jaime and Fernando have never been an entertainer like Aquino. Neither have they been boxing champions. They rely mostly on their regular compensation that is subject to withholding tax. Their taxable income does not include dividends they periodically receive from Mermac.

Despite their non-exposure to entertainment or boxing, there is no doubt that they are much richer than Kris, the actress, or Manny, the boxing champion. After all, through Mermac, Jaime and Fernando control Ayala group of companies.

esdperezgmail.com

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