SEC turns down LBC shares sale plan

Logistics giant LBC Express Holdings Inc. suffered a setback after the Securities and Exchange Commission rejected its almost P1.2-billion share sale plan, saying the company violated its rules by withholding important information, including an ongoing legal case against LBC’s owners.

SEC spokesperson Arman Pan said in a text message the regulator had rejected on April 11, 2017 the company’s registration statement, a requirement before LBC could sell shares to the public.

The offer involved up to 69.1 million common shares, which would have raised P1.17 billion at the maximum offer price of P17 per share.

The company earlier said most of the proceeds of the sale, about 85 percent, were secondary shares, meaning these would have gone to the selling shareholders. The remainder were primary shares, to be used for LBC’s business expansion.

Pan said the SEC rejected LBC’s offer for its “non-disclosure of material information” in its prospectus, required under the Securities Regulation Code Implementing Rules and Regulations.

Specifically, the non-disclosure was on legal proceedings against members of the Araneta family that owned LBC and the status of its listing with the Philippine Stock Exchange.

“The company respectfully maintains its intention and desire to disclose all relevant information pertaining to the company, which are required under the Securities Regulation Code,” LBC said in a regulatory filing yesterday.

“In response to the SEC’s requirement, the company had taken steps and measures to expand the scope of the information on the legal proceedings involving certain members of the Araneta Family. However, due to the timing of the submission, the SEC may not have had sufficient opportunity to consider these additional and expanded disclosures,” it added.

The issue was linked to affiliate LBC Development Bank, which was closed by the Bangko Sentral ng Pilipinas in 2011. The BSP cited huge advances to LBC Express as a reason why the thrift bank, which was aggressively expanding in the remittance business, became insolvent.

State-owned Philippine Deposit Insurance Corp. had already filed an P1.8-billion claim against parent company LBC Development Corp., LBC Express Inc., LBC Properties and Araneta family members.

“LBC was found to have committed material misrepresentation by willfully omitting the details of the pending criminal and administrative cases such as estafa and conducting business in an unsafe and unsound manner filed by Philippine Deposit Insurance Corporation and Bangko Sentral ng Pilipinas against members of the Araneta family, among others,” Pan said, citing a report from the SEC’s Market and Securities Regulation Department.

“Based on records, the Aranetas are the control persons of LBC through LBC Development Corp. which is wholly owned by the Aranetas. The significance of the subject cases necessitates a full and fair disclosure, which LBC grossly failed to do,” he added.

Moreover, he said LBC had failed to disclose information relating to the listing application of its private placement transaction, noting only that it was being reviewed by the PSE.

He said the PSE had informed the company in a letter on March 13, 2017 that the case filed by the government against the LBC Group “raised serious concerns with regard to LBC’s compliance with the PSE Suitability Rule.”

“Hence, the PSE decided to defer the processing of the listing application covering the investment shares, the public shares, the backdoor listing shares and follow-on offering, pending the resolution of the said suitability issues,” Pan noted.

LBC is a major player in the logistics sector. In the first nine months of 2016, the company booked a profit of P2.3 billion, up 21 percent, while revenue hit P6.4 billion, up 12 percent.