Megawide buys back Sy stake; enters RE sector
MEGAWIDE Construction Corp. is buying the renewable energy (RE) business of its controlling shareholders under Citicore Power Inc., kicking off a five-year diversification plan to transform from a construction and engineering firm into a fully diversified infrastructure conglomerate.
Amid the diversification program, the company agreed to buy back the 17-percent stake held by the family of tycoon Henry Sy Sr. through Sybase Equity Investment Corp. These consist of 410.84 million shares that were worth P4.6 billion based on Friday’s closing. Megawide is buying back the shares held by Sybase at a price based on the seven-trading day volume weighted average price ending on July 28.
The purchase of the Sy family’s stake, which Sybase acquired when Megawide held an initial public offering (IPO) in 2011, cements the Citicore group’s control of the diversifying company.
Megawide also disclosed that it had agreed to acquire 100 percent of Citicore Power from Citicore Holdings Investments Inc.
Citicore Power is a renewable energy company with a commitment to produce 1,000 megawatts (MW) of clean energy such as solar, biomass, wind and hydropower. It operates three solar power projects in the provinces of Bataan, Negros Occidental and Cebu that collectively produce more than 100 MW of electricity going to the national grid.
The purchase of shares in Citicore Power, however, will be subject to fair valuation report from an independent party to be engaged to ensure arm’s length valuation given that Megawide is buying from its parent company.
“We set out with our five year plan in 2011,” said Megawide chief financial officer Oliver Tan. “The IPO was set up with the vision to transition from pure construction to a well-diversified infrastructure and engineering conglomerate. Now we have achieved that, we want to pursue stronger, wider-ranging recurring sources of revenue.”
Under the new structure, Megawide’s core businesses will be in four areas: Construction, airport operation, transport and power generation with a focus on renewable energy. In 2015, construction contributed 66 percent of total income, with the airport business bringing in 34 percent.
“Megawide is already at its prime as a construction company. More than ever, it is capable of providing the most basic and one of the important components of these businesses and that is EPC (engineering, procurement and construction),” said Megawide chief executive Michael Cosiquien.
Megawide officially acquired the concession to operate Mactan Cebu International Airport (MCIA) in 2014. The 25-year build-operate-transfer contract includes the renovation of all landside facilities and the construction of a second passenger terminal.
Earlier this year, Megawide reported the first full-year revenues of subsidiary GMR-Megawide Cebu Airport Corp. (GMCAC) at P1.48 billion, attributed to strong aeronautical revenues, commercial revenues and rental revenues driven by a 15.5-percent increase in passenger growth.
Transport and energy are the newest assets in the Megawide group. The Southwest Integrated Transport Terminal (SWITS) is positioned as Megawide’s entry into the progressive property sector. SWITS is expected to bring in a mix of transportation infrastructure supported by mixed-use retail and commercial recurring revenues. The 35-year build-transfer-operate contract was signed in 2015.
