BizBuzz: Anticompetitive port buyout, redux

The interesting developments continue at the North Harbor amid the continuing tension between businessman Reghis Romero II and his estranged son Michael Romero.

Remember the secret sale and leaseback of the land on which Harbour Center Port Terminal Inc. (HCPTI) operates to a firm that seems to have close links to another mammoth port operator?

Note that HCPTI is now under the physical control of the elder Romero, who runs the company through another port operator, Malay Bulk Handling Philippines Inc., according to industry insiders.

The strange thing is, Malay Bulk was incorporated to operate and maintain ports around the same time as Port Capital SEA—the firm which bought from and leased back the land to HCPTI—was incorporated.

As we’ve said before, it seems the people behind Port Capital SEA have clear links to a certain ports magnate who is known to squash industry competitors like bugs. OK, he doesn’t actually kill them, but he has historically managed to keep them at bay by allowing them to thrive below a certain size threshold, as token competitors.

In any case, a cursory look at Malay Bulk’s shareholders will reveal that the guys now running HCPTI have close business and corporate ties with this certain ports tycoon.

But how is this possible, since a government entity had previously filed a claim on the property—initially a joint venture undertaking between Home Guaranty Corp. and the elder Romero in the 1990s—that has since been sold to Port Capital SEA and now run by Malay Bulk?

To recall, HGC had filed a claim against the elder Romero in the Regional Trial Court of Makati questioning how the latter was able to gain absolute control of HCPTI without the state housing agency’s board approval.

By way of defense against the HGC claim, R-II (as the elder Romero is known) claimed before the RTC of Makati that he had sold HCPTI to companies owned by his son, Mikee.

Following the falling out between father and son, and in a complete reversal of his claims before the Makati court, R-II filed a case in the RTC of Quezon City claiming that his son falsified the HCPTI transfer documents, even if the sale of HCPTI to Mikee-owned companies had been reflected in the audited financial statements of RII’s companies.

Port Capital SEA seems to have protected itself on the HCPTI “ownership problem” by inserting in the HCPTI leaseback agreement an ingenious termination provision that states that “the lease may be terminated by the buyer, as lessor, by giving at least 30 days prior written notice in the event the current controlling shareholder of the lessee (seller) represented by Reghis M. Romero II loses control of the lessee (seller). The buyer, as lessor, may terminate this lease at any time by giving written notice to the seller at least 60 days prior to the effective date of termination.”

As such, in the event R-II loses in the Makati and Quezon City cases (and therefore loses control over HCPTI), Port Capital SEA will gain absolute control over the land of a competing port operator. Pretty amazing!

The question now is whether the Philippine Competition Commission will have enough courage to take a closer look at this potentially anticompetitive port deal given that (1) the nominees of the buyer are closely associated with a dominant competitor, (2) the land was sold at a discount to market prices, (3) the highly publicized ownership claim of HGC against R-II and his companies over ownership of HCPTI, (4) the very public corporate squabble between the Romero patriarch and his son, and (5) the brilliant termination clause of the leaseback agreement between Port Capital SEA and HCPTI.

HGC may also want to examine the HCPTI–Port Capital SEA transaction as the government may be handed a Phyrric victory in the Makati case in case it reacquires ownership of HCPTI after the firm’s assets have effectively been dissipated.

Courage, anyone? —DAXIM L. LUCAS

Ayala’s startups

A long time ago, before the era of Wi-Fi and smartphones, the country’s oldest business house Ayala Corp. created a new business unit called i-Ayala to foster innovation, and invest in dotcom and tech companies. The group forked out some P1 billion then, but hardly benefited from the investment.

The foray into technology then was deemed ahead of its time.  The internet was just picking up in the Philippines and tech investing didn’t have the benefit of hindsight then.

About two decades after, the Ayala group is again building up its investments in technology and is now keen on providing financial muscle to startup companies that offer anything cutting edge or potentially disruptive (outside of Globe Telecom’s Kickstart Ventures). Reflecting its reenvigorated appetite for tech investing, Ayala recently announced its pioneering entry into e-commerce focused on the ePharmacy (MedGrocer), inclusive financial technology (GCash and Fuse Lending operator Mynt) and online retailing (Zalora).

Ayala has so far invested $50 million to $100 million in potentially disruptive businesses.

Ayala also bought a minority stake in a startup company in Silicon Valley that has developed “proven” technology to enhance efficiency of solar panels.  To date, this is a small company but with a big laboratory and production lines. “The economics of solar is moving in the right direction which we believe is going to be the  solution to many energy problems,” Ayala Corp. managing director Rene Almendras said.

Due to a confidentiality clause, Ayala can’t disclose the name of the solar technology firm. Anyhow, the investment is deemed “too small” relative to Ayala’s total portfolio to compel any disclosure of material info.

Ayala Corp. chief finance officer Teodoro Limcaoco stressed that the group had no carte blanche mandate to buy into just any startup.  He said Ayala would be open to investing in startups that offer synergy with the group’s existing business and those that bring something disruptive or innovative to the industries the group was in.  “We also have to believe in the founder’s vision and credentials,” added Paolo Borromeo, Ayala group head of corporate strategy.

“That shows you how we are evolving at the Ayala Corp. level. We’re willing to invest seed funding now to new starups whereas before, we were always hesitant to these things,” Borromeo said. “We’re bolder but still deliberate,” Almendras added. — DORIS DUMLAO-ABADILLA

Expanded Metropolitan Park

Ty family-led GT Capital is one of the few conglomerates with a vertical property arm that has not really embarked on large-scale mixed-use developments, not at the same scale as the new urban hubs or new central business districts being developed by its peers. Instead, the Federal Land has taken a more selective approach, focusing on pocket developments.

This will all change as Federal Land, now under the leadership of former banker Pascual Garcia III, former president of Philippine Savings Bank, recently consolidated vast tracts of land in its Metropolitan Park along Pasay’s Manila Bay area. Federal Land consolidated its hold on some 40 hectares of land in this area—which is adjacent to the Pagcor Entertainment Complex and Mall of Asia complex. This gives the property developer 20 hectares of additional prime landbank to build on in the decades to come.

Federal Land has completed master-planning the expanded Metropolitan Park estate, which will have 20 to 22 new office and residential towers and a destination shopping mall. These are on top of 15 residential towers already undergoing various phases of construction.

Suffice to say, this is the biggest urban mixed-use project in Federal Land’s growing portfolio, one that will signal its evolution as a bigger property developer reshaping the skyline of the metropolis in the years to come.—DORIS DUMLAO-ABADILLA

Aboitiz joins the fray

For those with deep pockets, betting on infrastructure can be a great way to secure steady returns in a meaningful manner.

In the case of Aboitiz Equity Ventures Inc., it recently established a company to let everyone know it is bent on doing just that.

Called Aboitiz InfraCapital, the unit would serve as the group’s so-called “fifth leg” after power (really most of the pie), banking, food and property.

Roman Azanza III, first vice president of the unit, said the subsidiary was established in January this year. Its first project would be a bulk water concession in Davao.

Ideally, all public private partnership projects and other infrastructure investments would be undertaken by this unit, similar to structures employed by other conglomerates such as Ayala Corp. and San Miguel Corp.

Right now, the company is shopping for a new airport partner after its previous consortium with France’s Vinci Airports was no more after the transportation department decided to unbundle the regional airports’ PPP— much to the surprise of would-be bidders.

Beyond airports, Aboitiz InfraCapital is really keen on doing a lot more investing, as are many of the country’s biggest players.

The real question is: where are those projects? —MIGUEL R. CAMUS