SM Development to be put under Shoemart

REPORT FROM BUSINESSWORLD LISTED FIRM SM Investments Corp. is set to transfer its shareholdings in its housing subsidiary through a share swap agreement with another subsidiary. In a disclosure to the exchange, SM Investments said it would enter into a share-for-share agreement with Shoemart, a firm that’s privately held by the Sy family, in a bid to consolidate all of its property development businesses under Shoemart. The disclosure quoted SM Investments Executive Vice-President and Chief Financial Officer Jose T. Sio said the respective boards of both parties agreed to swap SM Investments’ holdings in SM Development Corp. (SMDC) equivalent to approximately 1.82 billion shares for additional holdings in Shoemart, Inc. SM Investments holds a 59% stake in SMDC and a 65% stake in Shoemart. The remaining 35% in Shoemart is owned by the Sy family. SM Investments Vice-President and Investor Relations Officer Corazon Guidote, in a telephone interview, said the Sy family’s stake in Shoemart will be diluted depending on the valuation of shares to be issued. She said the valuation is still subject to the approval of the Securities and Exchange Commission. Simplifying the structure "We’re simplifying the structure and we’re transferring our property assets to Shoemart. Through this, Shoemart will become a holding company [of all our property group] and we will not directly own SMDC anymore," said Ms. Guidote. Shoemart, which used to be SM Group’s flagship firm for its mall operations, currently owns 15% of SMDC, which serves as its residential unit. Also under Shoemart are the property groups catering for the commercial, tourism and hotel components. Preparing for a backdoor listing Analyst Claire Quiray of Accord Capital Equities Corp. said consolidating these groups would strengthen Shoemart and could attract investors. "For the meantime, maybe they’re trying to strengthen these property groups into one umbrella and spin them off. Another possibility is that they could engage Shoemart, Inc. through a backdoor listing in the future," she said. "SM Investments and Shoemart, Inc. will comply with all the regulatory requirements, including the rules on tender offer," the disclosure read. The company added that it has engaged Macquarie Securities (Asia) Pte. Ltd. as financial advisor in relation to this transaction. SM Investments, one of the country’s largest conglomerates, is engaged in shopping mall development, retail merchandising, financial services, and real estate development and tourism. As of end-June, its total assets and stockholders’ equity stood at P246.52 billion and P142.81 billion, respectively. Its shares on Monday closed 0.61% higher at P2.50 to P412.50. Meanwhile, SMDC targets residential properties near the SM shopping malls. SMDC launched in 2003 the first phase of its maiden project, "Chateau Elysee" in Parañaque through its 85.5% owned subsidiary, SM Synergy Properties Holdings Corp. SMDC’s shares on Monday closed 4.5% higher at P4.65 apiece from Friday’s close of P4.45. — Lovely Nica P. Lee/BusinessWorld