Puregold to use IPO proceeds to finance P6B expansion

MANILA, Philippines—The country’s second-biggest retailer Puregold Price Club Inc. has mapped out a P6-billion plan to scale up its business and nationwide geographic footprint through 2013 using the bulk of the proceeds from an upcoming stock market debut.

Puregold, which will be the first purely hypermarket and supermarket stock play on the Philippine Stock Exchange, has set the indicative price range for its initial public offering at between P12.50 and P16.50 a share.

The offering price will be finalized on September 21, during which the international offering will begin. The domestic offering will run from September 23 to 29 while the listing of shares on the PSE under the ticker “PGOLD” is scheduled on October 5.

During a domestic road show on Friday, BDO Capital and Investment Corp. senior vice president Gabriel Lim said Puregold would sell up to 600 million common shares, 500 million of which would consist of primary shares and 100 million secondary shares to be sold by the Co family. There is also an option to upsize the offering by as much as 90 million shares to be taken out of the Co family’s existing shares in case of strong demand.

This suggests that the offering size can reach as much as P11.38 billion, including the overallotment option. The size will range between P7.5 billion and P9.9 billion without the overallotment. The IPO will bring at least 30 percent of the company’s outstanding stock to public hands but this ratio could go up to 34.5 percent if the overallotment option is exercised.

BDO Capital and First Metro Investment Corp. are the domestic lead underwriters for the IPO while HSBC and UBS are the international lead managers. Evercore Partners is Puregold’s financial adviser.

Up to 420 million shares of Puregold’s offering will be sold in offshore transactions outside the United States. After Friday’s briefing to domestic investors, an international roadshow will be held in Hong Kong, Singapore, London and the US starting this week.

“It’s a multi-format, efficient and scalable platform and business model. We have continuous potential for growth following a history of phenomenal growth in the past 13 years,” Puregold president Leonardo Dayao said during the investors’ briefing on Friday.

Puregold, led by the family of controversial Chinese-Filipino businessman Lucio Co, has 77 stores as of end-August, which will expand to 100 by the end of this year. In 2010, Puregold grew its net income by 288 percent to P510.4 million from a year ago on the back of a 20.7-percent growth in net sales to P29.1 billion. In the first six months of this year, net profit went up 269 percent to P782.8 million, fueled by a 41-percent jump in net sales to P17.3 billion from last year.

Based on its prospectus, about P6 billion will be spent for further expansion through 2013. Of the total proceeds from the primary offering, P2.24 billion will be used for bank loan refinancing while the rest will be used for its nationwide expansion.

Puregold’s customers comprise retail consumers from the middle to lower income segments and small business owners who resell products in local neighborhood convenience stores known as “sari sari” stores as well as canteens, restaurants, bakeries and drug stores.