MEGAWORLD CORPROATION (MEG): Offers to acquire AGI’s stake in GERI

MEG to acquire GERI stake from AGI. MEG has agreed to purchase the 49.20% stake of Alliance Global Inc. (AGI) in Global-Estate Resorts (GERI) for a total purchase price of Php10.43 Bil or Php1.93 per share. After the acquisition, MEG will own 74.96% of GERI and will initiate a mandatory tender offer for the remaining GERI shares held by minority shareholders at Php1.93 per share.

Financing not a problem. MEG will pay for the transaction in cash as it has Php31.75 Bil in cash and cash equivalents as of end FY13. MEG may temporarily have to borrow around Php7 Bil but this should not be a problem for the company. MEG has expressed plans to sell its 8.99% stake in RWM which is valued at Php13.82 Bil based on the current market price of RWM. The sale of this would put MEG back in net cash position.

Consolidation complete.The acquisition will complete the consolidation of all real estate businesses of AGI under MEG, enabling MEG to capitalize on growth opportunities of the property market. We have no changes in our fair value estimate for MEG at this point but we believe this will be NAV accretive to MEG as the company is in a better position to unlock the value of GERI’s landbank through future developments.

Reiterate BUY on MEG. We reiterate our BUY rating on MEG with a fair value estimate of Php5.48.

- Col Financial

Emperador board approves maiden debt sale to help finance doubling of profit in 2-3 years

Emperador Inc aims to double earnings in the next two to three years as it plans to tap the market to finance expansion.

"The expansion is in line with Emperador’s strategy of diversifying and strengthening its liquor product portfolio as well as its premiumization strategy in the liquor industry," the liquor arm of Andrew Tan-owned Alliance Global Group Inc.

Emperador's profit climbed 17.4 percent to P5.8 billion last year from P5 billion in 2012, bucking the impact of higher excise taxes to remain as the world’s largest selling brandy brand.

To strengthen its capital base and fund its expansion, the company’s board of directors cleared the appointment of global investment banks to advise the firm as it undertakes its maiden debt offering.

Emperador plans to raise an amount equivalent to as much as 70 percent of its stockholders' equity even after it closed last year with P24 billion in cash.

Based on its stockholders' equity of P30.89 billion at end-2013, the leading brandy maker may raise as much as P21.62 billion from its first debt issuance.

Last year, the company embarked on a five-year plan to double sales volume and corner a third of the world market in five years. It is in talks to acquire Diageo’s Whyte and Mackay spirits business but an agreement has yet to be reached.

So far, Emperador has invested P5.8 billion in the most technologically advanced vineyards, distilleries and bodegas in Spain.

This year, the liquor maker is spending P4 billion to boost its production capacity in the Philippines. Besides flagship Emperador, the company also manufactures the Generoso and Emperador Light brandies as well as a line of flavored alcoholic beverages called The Bar.

Emperador sold 33 million cases last year to remain the world's largest selling brandy brand and the largest liquor company in the Philippines. Emperador Brandy comprises seven out of 10 liquor bottles sold in Manila, the company said.

- Interaksyon