Aboitiz buys out WG&A partners

Cebu-based Aboitiz Equity Ventures Inc. (AEV), one of the country’s largest family-controlled conglomerate, has bought out its partners in the publicly-listed shipping consortium WG&A for about P3.65 billion.

In a statement to the Philippine Stock Exchange, AEV assistant corporate secretary Elsa Divinagracia said an agreement was reached last Wednesday by the major shareholders of WG&A (which stands for William, Gothong, Aboitiz Inc.) for the acquisition by AEV of 918 million shares, equivalent to approximately 61 percent of the shipping company.

The said shares represent the ownership of the Chiongbian and Gothong groups, two other prominent families in the shipping business. WG&A was formed in 1996 via the merger of the Chiongbians’ William Lines, Carlos Gothong Lines Inc. and Aboitiz Shipping Corp., becoming the largest and most profitable shipping company in the Philippines.

WG&A operates 23 vessels nationwide and is the largest provider of domestic ferry transportation in both the passenger and cargo business. In the first half of this year, its operating profit reached P649 million, up 11 percent from last year’s level. Net income stood at P571 million on revenues of P6.7 billion.

Divinagracia said with the existing 31 percent ownership of AEV in WG&A, the Aboitiz group will control over 92 percent of the company upon the completion of the sale transaction.

"This transaction is a very strategic acquisition for AEV," said EVP and COO Erramon Aboitiz. "It consolidates our ownership and management position in a company which is the dominant leader in the shipping industry and one which would provide very healthy returns and cash flow for our group."

AEV will purchase the shares at P3.98 each, a substantial premium over WG&A’s closing price P3.40 per share as of yesterday.

"This is a win-win situation for all shareholders," added Victor Chiongbian, CEO of the Chiongbian group. "We believe that we have divested at a very reasonable price and that we would be able to re-channel our resources in the fast-growing logistics business."

Based on the agreement, AEV will pay half of the purchase amount in cash as of the closing date with the remaining balance payable over five years with interest fixed at 12 percent and a one year grace period on principal.

The company expects the closing of the deal within the next 60 to 90 days.

"With a deregulated industry, improved port facilities in Manila for both freight and passage, a strong brand name, low leverage, strong cash flows and a leadership position in the industry, WG&A can provide AEV with the earnings growth to complement its other investments in power, banking and food," Divinagracia said.

In the first six months of 2002, AEV earned a net income of P1.15 billion, up a sizable 43 percent from last year, powered by gains in its electricity ventures, banking and other portfolio investments.