Zobels’ 47.13% ‘minority’ stake in ALI

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Emeterio Sd. Perez

AMAIA Land Corp. is a wholly owned subsidiary of Ayala Land Inc. (ALI). In turn, Ayala Corp. (AC) has “effective ownership of 47.13 percent” of ALI, with the public holding the remaining 52.87 percent.”

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ALI’s own public ownership report (POR) confirmed AC’s minority ownership in the property company, making the public the majority stockholders.

Two puzzling questions arose from ALI’s posting on the Philippine Stock Exchange website. Are ALI’s public investors REALLY the majority stockholders of the company? Was it telling the truth when it said AC, which is known to be its parent company, was only a minority owner?

Yes, ALI could be telling the truth depending on the computations of ownership. By reporting AC’s 47.13 percent ownership of ALI, it was referring to ALI’s common shares. The percentage would give AC 6.934 billion common shares, out of ALI’s 14.713 billion outstanding common shares as of Dec. 31, 2016.

In ALI’s top100 stockholders’ list, AC was also the single biggest stockholder with 6.894 billion common shares, or 46.85672 percent. A footnote showed AC also owned additional 40.629 million common shares, or 0.276 percent, lodged with PCD Nominee Corp.

More public than others?

Ayala Land labelled the public as majority stockholders when they are not and never will be. ALI remains the property development unit of the Zobel-owned AC, the family-owned conglomerate. If AC holds only a minority stake of 47.13 percent of ALI’s outstanding common shares, it more than makes up for such “shortage” with its controlling ownership of 12.163 billion voting preferred shares, or a 93.08679 percent stake.

ALI is not more public than others as it would want the public investors to be. This is misleading. To prove this, Due Diligencer is doing a separate presentation based on ALI’s total outstanding capital stock of 27.779 billion shares divided into 14.713 billion outstanding common shares and 13.066 billion outstanding voting preferred shares.

In the first place, public investors comprise ALI’s majority stockholders, holding 52.87 percent of 14.713 billion outstanding common shares and not of the outstanding capital stock of 27.779 billion shares. They don’t, because of AC’s ownership of 12.163 billion voting preferred shares, which represent 93.08679 percent of 13.066 billion outstanding voting preferred shares.

Besides, the Zobels nominate and elect six regular directors of ALI’s nine-person board. They complete their control by appointing three independent directors, namely Francis G. Estrada, Jaime C. Laya and Rizalina G. Mantaring.

Recomputation

The problem lies with the Securities and Exchange Commission (SEC). As long as its regulations favor the owners of companies with listed shares more, the public will, more often than not, be at the mercy of regulatory authorities.

From the very beginning, the SEC should have exercised diligently its powers over the stock market. It does not. Instead, it is a big failure as far as the public stockholders are concerned. Who, for example, among SEC officials were responsible for allowing the Indonesians, who own First Pacific Co. Ltd., which is based in Hong Kong, to control the ownership of PLDT Inc. and its board?

A similar situation occurs in ALI. The major difference is that AC is owned by Filipinos while First Pacific is an Indonesian-owned company.

What recomputation?

The idea works this way. Why not add the shares owned by AC and get the equivalent percentage by dividing the sum by the number of ALI’s outstanding capital stock?

Thus, AC-held 6.934 billion common shares plus 12.163 billion voting preferred shares equals 19.097 billion shares. By dividing the sum, which is 19.097 billion shares by 27.779 billion shares, the result would be 68.746 percent, which should make ALI a subsidiary of Ayala Land.

Of course, this computation is not the way ownership control works.

Voting preferred shares

The use of a question mark in the subhead “more public than others?” is intentional. This is to show how companies listed their outstanding common shares to make it appear that they are more public than others when they are not.

These family-owned companies make it appear public investors are the majority stockholders, controlling more than 50 percent of their outstanding common shares.

The next corporate move they usually do is issue voting preferred shares that effectively dilute the majority ownership of the public. This has been happening despite the SEC’s supposed monitoring efficiency as the public is made to believe.

How on earth could ALI and other firms with listed shares be more public than others when the real company owners issue voting preferred shares for their corporate convenience? Besides, 6-percent interest earnings per annum seem not a bad gain compared with a mere 0.375 percent a year paid by banks for savings accounts.

There is a reason why this piece begins with the mention of Amaia Land. That will be discussed in the third part of this three-part series, next issue.

esdperez@gmail.com

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