SM wants Ortigas holding firm to go public

The SM group wants to see the Ortigas family’s holding firm OCLP Holdings going public to unlock the real value of the company.

“Development there is still very fluid,” said SM Investments Corp.  (SMIC) chief finance officer Jose Sio, when asked about the tug-of-war between the SM group and Ayala Land Inc. for control of the Ortigas holding firm. “We are ready to sit down and see how we can professionally run the company for the benefit of all.”

This followed reports that ALI had gained the upper hand in the contest as the swing vote—the Catholic Church, which has an interest of about 9 percent—had sided with ALI.

The faction supporting the SM group led by Fernando Ortigas is estimated to have around 42-percent control of the holding firm while ALI, excluding the additional voting support from the Church, had 47 percent, Sio estimated.

Sio said the SM group remained keen on the company even with its alliance in control of only 42 percent. “We’re quite happy provided income growth is there,” he said.

“One of the option there that we’re looking at is bringing the company public. With that we will see the real value of the company,” he added.

Meanwhile, Sio said the group’s shopping mall business through SM Prime Holdings Inc. would likely have 10 stores in China in around three years. This is the critical mass needed to be able to spin off the offshore unit and possibly list in an overseas exchange.

At the same time, SMIC estimated that demand for the company’s American depositary receipts (ADRs) would be  $40 million to $50 million worth of underlying SMIC shares based on unofficial ADRs done by several banks.

SMIC recently rolled out to the US market an entry-level ADR program, allowing investors to trade over-the-counter in their own time zone papers with shares of the Philippines’ largest conglomerate as underlying equity.

Under the program launched through The Bank of New York Mellon, ADR securities issued in the US representing SM common shares can be traded over-the-counter under the ticker symbol SMIVY. One SM ADR represents 0.5 common shares of SMIC.

ADRs refer to negotiable certificates issued by a bank in the US that serve as a proxy to a specified number of shares in a foreign stock that is traded on the stock exchange. These are denominated in US dollars, with the underlying security held by a US financial institution. Such an instrument is deemed a good option to acquire an interest in a foreign company while collecting dividends and capital gains in dollars.

What SM Investments created is a “level 1” or entry level ADR program. This is the simplest form of sponsored ADR, which means that it is a non-capital raising activity and SMIC will not get the benefit of listing on the US stock exchange. However, its ADRs can trade over the counter and there are no reporting obligations to the US stock exchanges.

Asked whether SMIC would offer higher-level ADRs in the future like Philippine Long Distance Telephone Co. did, Sio said: “We’ll see first if it’s worth it.”