SM revives Goldilocks buy-in plan

Conglomerate SM Investments Corp. has revived a deal to invest in food retailer Goldilocks Bakeshop. However, instead of taking the majority control as earlier expected, it is now willing to take a significant minority stake in the enterprise.

An industry source familiar with the discussions said SM was firming up a deal to acquire 34 percent of Goldilocks. This investment plan was also noted by SM officials in a teleconference with analysts last week in a discussion on the group’s portfolio interests.

A spokesperson from SM confirmed to the Inquirer that the group had rekindled its interest in the bakeshop chain but noted it would take a “minority” stake.

With an estimated market valuation of about P2 billion for 100 percent of Goldilocks, analysts said a 34-percent acquisition would likely fall below the P2-billion deal size threshold that required notification and clearance from the antitrust agency Philippine Competition Commission (PCC).

The buy-in deal gives SM a foothold in the restaurant business, diversifying into a new retailing segment that can benefit from increasing consumer affluence in the Philippines.

A 34-percent stake is influential enough to affirm or veto key corporate decisions that require concurrence from two-thirds vote of shareholders.

Owned by the Yee family, Goldilocks has more than 600 branches here and abroad.

Based on regulatory filing, Goldilocks chalked up a net profit of P271.04 million last year, up by 32 percent from P204.43 million in net profit posted in 2016 as margins improved. Net sales rose by 7 percent to P5.97 billion last year from P5.58 billion last year.

Total assets at end-2017 stood at P3.3 billion.

At end-2017, the PCC cleared SM Retail’s acquisition of Goldilocks but SM was asked to commit to certain measures amid an apparent concern that gaining control of this business would make SM, as landlord, competitor to other fast-food tenants.

The PCC cited risks that “discrimination or unfair treatment” might arise in the form of “arbitrarily assigning competitor tenants to disadvantageous locations or unfavorable lease terms.” It can also come in the form of giving less favorable lease terms or completely refuse them lease space in the mall, which amounts to total foreclosure.

As such, SM was required to put up an “information firewall.” This means SM mall operator would not give Goldilocks access to competing mall tenants’ information—including sales data captured by the POS system of SM tenants, whether referring to consolidated sales, product category level or stock keeping unit level information, such as prices or quantities sold.

The SM Group was also obliged to comply with its commitment and submit reports to the PCC. Over a period of five years, the parties would have been monitored periodically by a team of experts from PCC. Monitoring would have included random inspections.