Consolidation of Tan firms under proposed LT Group ‘progressing’

Tanduay Holdings president Michael Tan: More than halfway through. PHOTO FROM LUXURYMANILA.COM

MANILA, Philippines—Tanduay Holdings Inc. is now “more than halfway” through the consolidation of major businesses under the group of tycoon Lucio Tan and poised to proceed with an equity offering of up to three billion shares before the year ends or in early 2013, according to company president Michael Tan.

Tan, the tycoon’s heir-apparent, told reporters after the company’s special stockholders’ meeting on Monday that the group was “very bullish” on the Philippine economy and the Aquino administration.

Based on Tanduay’s current market price of about P12 a share, an offering of three billion common shares will be worth about P36 billion. But the pricing and total offer size have yet to be determined and would all depend on a book-building process, Tan said.

Tanduay has mandated UBS Investments Philippines Inc. as financial adviser and sole bookrunner for the proposed equity offering, which will effectively be a re-initial public offering (IPO) once major businesses under the group–tobacco, airline, liquor, banking and property–have been consolidated into the company.

“We’re also doing this because the macroeconomic condition is very, very good. We feel it’s the right time to do this—to participate in the growing economy,” he said.

With the Philippines being the “darling of Asia, if not the world” and the economy “on the roll,” Tan said the LT group would like to participate in the current situation.

Tanduay shareholders approved during Monday’s special meeting the following:

— the change in corporate name to LT Group Inc., subject to final approval of a charter revision from the Securities and Exchange Commission;

— the offering of up three billion additional shares through a top-up offering, which means controlling shareholders will lend their shares for a quicker equity deal, then use the proceeds to purchase the same amount of shares; and

— the waiver of a public offering requirement in relation to the top-up offering.

“We hope the market will keep its upward trajectory and investor sentiment high,” Tan said, adding that the consolidation would have to be finished prior to the equity offering, which would likely happen by yearend or early 2013.

The assets to be folded into Tanduay are the 90-percent stake in beer brewer Asia Brewery, at least 83 percent of cigarette manufacturer Fortune Tobacco Corp., 98.1 percent of Eton Properties, 49.84 percent of flag carrier Philippine Airlines (post-recapitalization), 50.97 percent of budget carrier Air Philippines Corp., 34.79 percent of Philippine National Bank and 27.62 percent of Allied Bank.

Asked why other businesses like MacroAsia Corp. were not included or why only a non-controlling interest in the banking units were to be infused into Tanduay, Tan said the previously disclosed assets were those to be consolidated first. He added that other interests would be considered “in the future, if we have the opportunity.”

As to whether the group was keen on getting a strategic partner for each of its operating units similar to the route taken for the tobacco and airline businesses (where management control was ceded to respective partners for each business—Philip Morris and San Miguel Corp.), Tan said the group was open to “whatever will drive shareholder value” but noted that for now, other businesses would be kept under the group’s management.

“Like in tobacco, we have partnered with Philip Morris International because they are good in production and marketing. We’re good in distribution so it’s a good partnership. It doesn’t have to be us managing,” Tan said.