‘Bless the rich and their children’ appeared in this space as a Due Diligencer piece on June 16, 2015. As aptly titled, it was about the compensation of the two Zobel brothers who took over the management of Ayala Corp. from their father, Don Jaime Zobel de Ayala.
This time, Due Diligencer is taking another look at AC under the younger Zobels who, with the support of a team of managers who are “non-directors,” continue to chart the growth of the family-owned and -controlled businesses. It is time the public investors know who to praise for the rise in prices of AC shares they own and who to blame when the share prices fall.
Due Diligencer, however, opts to name only the two Zobels in this article. Its suggestion is for the public to access AC’s disclosures for the identities of the other members of the company’s management team. Simply go over AC’s filings which you can find via www.edge.pse.com.ph.
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Did you know that Ayala Corp. has 21 directors? Yes, the listed holding company that the Zobel family controls thru unlisted Mermac Inc. has 21 directors.
Don’t be deceived by the number —21 may be considered “overcrowding” for a holding company—but for AC it is not because only seven of them are members of the board. It just so happened that AC listed, in an ownership filing, the composition of its 18-person management team apart from the seven-man board and gave each of them the title “director.”
To sum up, seven members of the board plus 18 managing officers equals 25, which is not exactly correct because the total figure “double counts” the two Zobels. Jaime Augusto Zobel de Ayala, chairman of the board, and his younger brother Fernando, vice chairman, are among AC’s seven directors, but they are also among AC’s management officers: Jaime Augusto as chief executive officer and Fernando as president and chief operating officer.
Team of ‘directors’
Aside from the Zobel brothers, the other so-called “directors” include four senior managing directors; six managing directors; and four executive directors. Two assistant corporate secretaries complete the cast of AC’s 18-person management officers.
The Zobel-led management team of the Ayala group overseas the operations of three major units such as Ayala Land Inc., AC’s real estate arm; Integrated Microelectronics Inc., which is into electronics manufacturing; and Manila Water Corp.
Each of AC’s three major subsidiaries, in turn, has its own units, meaning directly owned separate entities or stock corporations. The Ayala group has also a number of associate companies in which it holds less than 50 percent.
As AC pursues expansion, the organizational chart of the Ayala conglomerate is somewhat too crowded for any observer to easily decipher for investment decision purposes.
Missing Don Jaime
Yes, missing from the list of AC’s management officers is Don Jaime Zobel de Ayala. As the family patriarch, he has entrusted to his two sons the management of the conglomerate. Sons Jaime and Fernando joined the board in May 1987.
With the retirement of their father in 2006 at age 72, who for sometime remained with the board as chairman emeritus, eldest son Jaime Augusto was elected chairman of the board and CEO while Fernando, who joined AC’s seven-man board in May 1994, was elected president and COO also in April 2006.
The public stockholders of listed companies that belong to the Ayala group probably want to ask the Zobels one very crucial test for their management.
Under their predecessors, AC got listed in 1976, Bank of the Philippine Islands in 1971, Ayala Land in 1991, Manila Water Corp. in 2005, and Globe Telecom Inc. in 1992 became public by listing some if not all of their shares on what was then the Makati Stock Exchange.
Any new IPOs?
Will the Zobel brothers undertake an initial public offering of shares of one of the family’s companies? If so, it would be an IPO that could be attributed only to them. If so, which would it be? Will it be Ayala Education Inc. which, as an AC subsidiary, has been expanding and had University of Nueva Caceres Inc. for its latest acquisition that cost it P450 million for a 60-percent majority ownership? If so, this would be their first IPO venture.
The Zobel brothers could also consider for an IPO Ayala Healthcare Holdings Inc., another subsidiary. Like Ayala Education, this healthcare unit is not a major one like Ayala Land, Manila Water and Integrated Microelectronics. Ayala recently bought out some of the existing stockholders of Generika group which held 50 percent of the pharmacy chain.
The Zobel brothers, the only children of Don Jaime and wife Bea, have expanded AC as a conglomerate thru borrowings and issuance of preferred shares. The latter, strictly speaking, are also debts and should not have been treated as an entry under equity but should have been counted as either short-term or long-term debts.
In an updated ownership disclosure, AC listed its outstanding capital stock of 819.6 million voting shares consisting of 619.6 million common and 200 million voting preferred shares. In addition, it has issued 20 million preferred B series 1 shares and 27 million preferred B series 2 shares.
By voting power, the holders of 200 million voting preferred shares would be equivalent to 24.4 percent of 819.6 million voting shares. Of the 200 million preferred shares, AC sold 192.2 million or 96.1 percent to only two stockholder—Mermac and Mitsubishi Corp.—to which it issued 159.6 million and 32.6 million shares, respectively. More on AC in another piece.