Biz Buzz: Lucio Co’s latest

Fast-growing retailer Lucio Co has gained a foothold in the local fast-food business by coming in as the strategic partner of the Pardo family in operating the Philippine franchise of American hamburger chain Wendy’s.

So don’t be surprised that there’s a Wendy’s restaurant now standing in the Shaw Boulevard store of S&R Membership or if you see more of them rising in more grocery or department stores affiliated with the person that some people call as the “new taipan.”

We got confirmation that Lucio and Susan Co—best known for the Puregold Price Club chain and recently cited as one of the 11 Philippine-based billionaires in Forbes Magazine’s list of wealthiest people—had quietly bought a few months ago a “significant” stake in the local operations of Wendy’s.

But similar to how it acquired Philippine Bank of Communications or the former Alphaland Tower, we’re told that the Cos bought into Wendy’s using one of their privately held companies.

The Wendy’s franchise, operated by Wenphil Corp., has been in the Philippines for 30 years and was valued at P1 billion in 2012.

The Co group, on the other hand, earlier said that it would like to go into different retailing formats. Through Cosco Capital, the group bought office and school products supplier Office Warehouse. The Cos also previously bought Cebu-based drug store chain 360 Pharmacy.

With an estimated net worth of $2.3 billion (based on Forbes’ estimate) and given the Cos’ track record in expanding Puregold, Wendy’s is seen heating up the competition in the fast-food business. Once operations have reached a critical mass, Wendy’s could also be among the businesses that the Cos may eventually fold into one of their listed companies—most likely Cosco—in the future.–Doris C. Dumlao

Makati madness

For the most part, little has really changed in Makati amid the confusion on who the financial capital’s real mayor is at the moment.

Last week, Junjun Binay was suspended and Vice Mayor Kid Peña was sworn into office. As all this happened, the Court of Appeals issued a stay order on the suspension, which was then ignored by the Department of Interior and Local Government (DILG).

Reckless “misencounter” threats have been made as well.

Despite all this, stop lights continue to blink, traffic enforcers still issue tickets and garbage is still collected in the city. Pretty soon, however, some resolution would have to be reached if City Hall workers are to receive their salaries.

Land Bank of the Philippines, which handles most payroll accounts for Makati employees, said it was still consulting its lawyers on how to handle the Makati situation. Apart from salaries, Landbank also handles Makati’s investments and several other types of accounts, according to the bank’s spokesperson.

“All we can say right now is due to the sensitivity of the situation in Makati, LandBank has sought legal opinion to help firm up our position,” the bank said.

With the end of the month coming, the bank’s position will have to be made fast or Makati employees’ salaries would have to wait until after Holy Week.–Paolo Montecillo

DOF’s big move

If your economy is now enjoying investment grade status and more investors are likely to come visit, then perhaps a new, bigger office would better serve such purpose.

In the case of the Department of Finance (DOF), which is in charge of making sure that the country is creditworthy, it plans to move out of its existing building and move to a new one set to rise just next to the current office.

Finance Undersecretary Gil S. Beltran said the new building would rise at the current women’s park next to the building being occupied by the DOF now.

A bid supplement on the DOF website showed that the agency was seeking consultancy services for the preparation of architectural and detailed engineering design plans for the proposed construction of the new DOF office building.

The budget allocated by the DOF under the 2015 general appropriations act for this contract amounts to P105 million.

For those interested, the deadline of submission of eligibility documents for the consultancy contract is on March 27.–Ben O. de Vera

EMV shift

The deadline for all local banks to shift to EMV technology for all debit and credit cards by 2017 may seem like a trivial change to most. After all, it involves just a one-time, albeit expensive, expense for banks as they replace their clients’ plastic, and upgrade automated teller machines (ATM) and point-of-sale terminals.

And at the end of the day, this expense will be worth it. Banks already lose hundreds of millions of pesos every year due to ATM and credit card fraud. The shift to EMV makes the use of plastic money safer. This could also boost confidence in cashless payments, which means banks save money from not having to hire armored trucks to bring cash around.

For those who aren’t bankers, EMV, which stands for Europay, Mastercard and Visa, is the newish technology used for many credit cards abroad (and for new credit cards issued in the Philippines) today. EMV technology replaces old magnetic stripes on cards with chips. This shift in hardware—and the way data is stored and written on credit and debit cards—makes fraudulent transactions more difficult, industry experts say.

Sure, shifting to EMV may be tedious for large banks, but the costs definitely outweigh the risks associated with noncompliance. However, the story is different for smaller rural and cooperative banks.

According to Encash, the local ATM network for small banks, many rural lenders are being forced to merge with larger players. “For some rural banks, when they compute the cost of the upgrade, it’s actually more expensive than the banks’ actual asset value,” an Encash official said.

So what’s a rural bank to do? Some are considering ring-fencing their operations, by letting customers use ATMs owned by their own banks. Others, meanwhile, could be forced to give up their entire ATM service altogether.—Paolo G. Montecillo

Airport PPPs

We know by now that airport projects tend to draw lots of private-sector interest for their huge commercial potential.

This is especially the case with air transport infrastructure located near prime tourist destinations. This is probably what the government was thinking when it decided to roll out PPP contracts for the Iloilo, Bacolod-Silay, Davao, Laguindingan and New Bohol gateways.

It’s still early days but, surprisingly, this PPP project has lured just three interested groups: San Miguel, Gokongwei-led JG Summit Holdings (which we will count together with Manuel Pangilinan’s Metro Pacific Investments given their partnerships talks) and Megawide Construction Corp.

That compares with the  Mactan Cebu International Airport deal in 2013, which drew 11 prospective bidders that eventually formed seven consortiums.

We’ve heard some explanations, including the Transportation Department’s last minute announcement that the Puerto Princesa airport would be bid out separately, removing from the list its 1.33 million annual passengers as of 2013.

But since this is Biz Buzz, we’ve gotten a more interesting reason from our sources. There’s apparently a circulating rumor that the planners at the department are considering implementing an “antimonopoly” policy on airport PPPs.

This has apparently spooked would-be bidders from participating, given the government’s plan to eventually place on the auction block the contract for Manila’s Ninoy Aquino International Airport—the crown jewel of Philippine airports, if there was such a thing.

The rumor, which some companies have already sought clarification from the government, suggested that a winner for the provincial airport PPP project could be disqualified from participating in a potential Naia bidding.

With Naia volumes well past 32 million passengers a year compared to about 8.5 million from the five provincial airports (minus Puerto Princesa), that might sound like choosing fast-food takeout over a fancy steak dinner.

It seems, though, that the rumor has little basis at this time.

Biz Buzz checked with Jose Perpetuo Lotilla, chair of the transportation department’s bids and awards committee, and he clarified that there was “no such policy” at the BAC’s level and that he was unlikely to approve such a measure if it would come to that.

“Frankly, I’m not a staunch believer of having more competition restrictions in highly regulated areas of economic activity,” Lotilla added. Let’s see if that straightens things out.–Miguel R. Camus

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