Puregold eyes merger with S&R Membership

MANILA, Philippines—Chinese-Filipino businessman Lucio Co plans to merge S&R Membership Shopping with Puregold Price Club Inc., thus consolidating his retailing businesses into a publicly listed vehicle catering to all market segments.

In a disclosure to the Philippine Stock Exchange Monday, Puregold said its board had authorized its management to commence study and discussions for the possible acquisition of S&R “at terms and conditions satisfactory to both parties.”

The planned infusion of S&R into Puregold will diversify the latter’s market base and potentially harness the power of increasing consumer affluence in the Philippines. S&R caters to the upscale segment while Puregold caters to the lower-income but more populous market segment.

“What’s good about the infusion is, remember that Puregold Price Club serves the CDE market and S&R serves the AB market. So with this, we will be able to cover the whole spectrum of the market segments,” Puregold president Leonardo Dayao said in a phone interview.

“We (in Puregold) haven’t focused much on the AB market so we now have a vehicle and a store format for that,” he added.

Puregold currently has three retail formats: hypermarket (Puregold Price Club), which caters to resellers and retail customers; supermarkets (Puregold Junior) and discount stores (Puregold Extra). The bulk of the business comes from hypermarket with an 86.7 percent share of total revenues.

As of end-September, Puregold had 48 hypermarkets, 20 supermarkets and nine discounter stores. In 2011 alone, a total of 15 stores were opened while 12 stores were opened in the last quarter of 2010. These new stores accounted for nearly a quarter of total net sales for the nine-month period in 2011.

S&R, meanwhile, operates six membership stores serving the AB market, located at Fort Bonifacio, Alabang, Diosdado Macapagal Highway, Quezon City, San Fernando (Pampanga) and Cebu.

In terms of geographic base, the potential merger will give Puregold a foothold outside Luzon, given S&R’s branch in Cebu. Puregold itself, however, has plans to put up stores in the Visayas and Mindanao within the next two to three years.

When asked about the timeframe to finish the study leading to the prospective infusion, Dayao said: “We expect to do it within the year, although you know, the timetable can change depending on many factors.”

No details were disclosed about S&R’s financial profile.

Puregold debuted on the Philippine Stock Exchange on October 5 last year at P12.50 per share. As of Monday, its share price rose by 72 percent to P21.50, giving it a market capitalization of P43.6 billion.

Its shares were down by 1.4 percent Monday after the disclosure of the prospective merger with S&R.

As of September last year, Puregold posted a net profit of P1 billion, up by 185 percent from a year before on the back of a 36.3-percent increase in net sales to P26.9 billion, in turn as a result of opening of new stores in 2011 and in the 4th quarter of 2010.

Originally posted: 11:41 am | Monday, February 20th, 2012