Lucio Co-led Cosco Capital sets $500-M equity offering

Lucio Co file photo

MANILA, Philippines—Cosco Capital, the conglomerate led by grocery and logistics magnate Lucio Co, is planning a follow-on equity offering worth as much as $500 million to attain a twin goal of widening its public float and boosting funds for expansion.

Financial market intelligence provider IFR, a Thomson Reuters publication, reported the planned shares offering, citing unnamed sources. IFR also reported that Deutsche Bank and JPMorgan have been mandated to manage the offering.

IFR also reported out of Hong Kong that the proposed deal would consist of $300 million worth of new shares in a primary offering, representing the fresh money to be infused into the company. The rest will consist of secondary shares, which means that the Cos may pare down their stake in the holding firm.

Among the proposed funding needs, which have been cited by the company are: expansion of real-estate portfolio including investment in Puregold-anchored properties, distribution centers and oil storage facilities (P6 billion); refinancing (P9 billion); expansion into non-food specialty retail (P2 billion) and working capital (P1 billion).

This follow-on offering – or essentially a re-IPO (initial public offering) – has been widely expected by the market even since Co restructured what was once a purely oil, gas and mining play Alcorn Gold Resources Corp. (APM) to become the holding firm for bulk of his businesses. This was similar to how taipan Lucio Tan transformed his liquor company Tanduay Holdings into LTG Inc., a holding firm for the group, which also recently made a successful $970 million re-IPO.

In the case of Cosco, the new assets injected by Co into this company consisted of the following: 51 percent stake in flasghip grocery chain Puregold Price Club Inc., a portfolio of liquir distribution companies, a portfolio of commercial real estate companies and an oil storage business (Pure Petroleum Corp.).

Puregold is the country’s second largest grocery retailer in the Philippines and the stiffest competitor of tycoon Henry Sy’s SM group.

In liquor distribution, the group is the dominant player in premium wine and liquor market with exclusive rights to leading brands. This business is expected to grow by 43 percent in 2013, based on Cosco’s briefing materials. Its portfolio currently has a total of 98 brands.

In real estate, commercial centers have an average occupancy rate of 96 percent in the last three years, backed by the retailing business.

On “non-food” specialty retail, those eyed by Cosco are pharmacy and construction/hardware materials retailing. Earlier, a privately owned Co company has acquired Visayan pharmaceutical chain ThreeSixty.

In exchange for the assets infused into Cosco, the company was set to issue 4.99 billion new shares at a subsciption price of P15 per share for a total subscription of P74.8 billion. As a result, the Cos’ interest in the company will increase to 93.4 percent, which means that the public float will be below the 10-percent minimum level required by the PSE.

The upcoming equity deal is thus meant to boost the company’s public float while raising fresh funds for expansion.

Cosco will start trading under the ticker “COSCO” by May 14, during which its par value will rise to P1 from 1-cent at present.