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Backdoor listing


The market made a fantastic weekly advance of 189.91 points or 2.7 percent at the end of trading last week on the back of the investment credit-rating upgrade it received from Standard & Poor’s (S&P). Similar to the first it received from Fitch Ratings over a month ago, the country was given a “stable” outlook while its credit rating was “raised to BBB- from BB+.”

Expectedly, the country is set for more capital inflows that would fuel more business opportunity and growth. One group reportedly getting ready to ride on the expected market tide is that headed by mining and oil businessman Alfredo “Fred” C. Ramos. This time, his subject of interest is to expand and enhance the private family flagship business, National Bookstore Inc.

Along with this development is the news that dormant listed company Vulcan Industrial and Mining Corp. (VUL) will be the backdoor vehicle for National Bookstore.

Vulcan’s plan

Retracing VUL’s market trading record, it looks like the plan has been hatched pretty much earlier, for VUL shares started to trade actively as early as the fourth quarter of 2012. Before that time, trading on VUL shares were sparing and largely below its par value of P1. Except for an occasional trade of more than one million shares in the last six months, the average daily volume of VUL has been just over 100,000 shares.  However, on Nov. 5, 2012, daily volume suddenly rose to 23.75 million shares.

Interestingly, the day’s transaction for VUL on Nov. 5 was flat: It “opened at P1.39, hit the high of P1.39, moved sideways to the low of P1.39 and closed at P1.39” a share. Despite the sudden increase in volume, VUL’s share price did not go through the usual speculative run during the day. The general investing public did not seem to have any idea of what was happening that they sold than bought.

This seems to be how the group has kept their plans from the public. On second thought, it could be as well a reflection of the group’s actual situation. The group may not yet be that clear on what to do that nothing has filtered through the public, which would explain as well the behavior of the public last Nov. 5. Meeting with the company’s top honchos, the plans for the company seemed to be still far from ready. Also, they have yet to obtain the necessary approvals to put things into proper motion.

The following measures are yet to be acted upon in the company’s annual stockholders’ meeting on May 29:  “Approval in the increase of the authorized capital stock of the company from P600 million to P4 billion; approval of the subscription by National Bookstore Inc. and/or its designees to the increase in authorized capital stock at P1 per share through the conversion into equity of its advances amounting to P363,944,338 as of Dec. 31, 2012, as audited and cash subscription of up to P3,036,055,662.

“Approval of the waiver of public/rights offer relative to the increase in authorized capital stock via additional subscription of National Bookstore and/or its designees. Approval of the change in primary purpose from mining to retail, and relegation of mining and oil exploration as secondary purposes; approval of the following secondary purposes to include, among other things, wholesale, publishing, printing, manufacturing, distribution, contracting and all other activities necessary for or incidental thereto.

“Approval of the transfer of mining and oil-related assets; approval of the change in the corporate name from Vulcan Industrial and Mining Corp. to National Book Store Retail Corp., or such other name acceptable to the SEC and as may be determined by the board of Directors; and approval to delegate to the board of directors the authority to amend the By-Laws.”

VUL was incorporated in 1953. At present, it is mainly an oil and mineral exploration and mining company. It has been holding a number of Service Contracts (SC) and Geophysical Survey and Exploration Contracts (GSEC) since 1976 and, through its wholly owned subsidiary Vulcan Materials Corp. (VMC), “produces rock aggregates to create concretes and silica sand, ingredients used for making glasses and bottles.”

Bottom line spin

National Book Store is the biggest bookstore and office supply store chain in the Philippines. From available references, the company has an ongoing joint-venture agreement with SM Prime Holdings and Ayala Corp. Retail giants Robinson Land Corp. and Megaworld have exited from the joint-venture agreement with the company last Jan. 1, 2010. Araneta Center has likewise exited from the joint venture.

Anvil Publishing is reportedly a subsidiary of the company, but it may not be included in the deal. Obviously, more information is needed to understand the investment potential of the deal of placing the company public through VUL as backdoor vehicle. That’s why the ongoing price play on VUL does not have indicative value at all.

If you are one of those trying to ride on the stock play of VUL, this time as National Book Store, it is best to wait for more development.

In a surprising twist, the group’s top honchos are discouraging the public from speculating relative to the exercise.  This is exactly opposite to the obviously induced market plays in some recent backdoor listing deals.

But if you wish to make some wild forward-looking conclusions about the future of the company, National Book Store has already established some foothold in Hong Kong—as far back as 2007 through a subsidiary—that could make the company become “a regional player version of the online retail store Amazon.com.”

(The writer is a licensed stockbroker of Eagle Equities, Inc..  You may reach the Market Rider at marketrider@inquirer.com.ph , densomera@msn.com or at www.kapitaltek.com)

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Tags: Business , column , den somera , investment grade rating , Stock Market

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