Tan to invest $95M to keep Megaworld stake

Businessman Andrew Tan is investing as much as $95 million to maintain his 45- percent stake in upscale real estate developer Megaworld Corp.

Megaworld executive vice-president Kingson Sian said Tan will subscribe $90 million to $95 million worth of the company’s planned stock rights offering scheduled in January 2007.

"This only goes to show how confident our chairman and president Mr. Tan is in the prospects of the company," Sian said.

Sian also noted that the company would put off any stock rights offering or share sales for the next two or three years.

Analysts have questioned the timing of the offering, coming almost immediately after the company’s P5.4-billion offering and $100-million five-year notes issue.

To appease investors’ concerns, Megaworld amended the terms of its stock rights offering to avoid diluting shareholders’ earnings.

The decision was made after conducting further consultations with its local and foreign stockholders who felt that the terms earlier approved by the company’s board were disadvantageous to them.

Megaworld is now offering two shares for every five common shares held by stockholders. It originally planned to offer shareholders just one share for every two existing common shares of the company.

According to the company, the new terms "will result in higher earnings per share and net asset value for its stockholders."

The pricing formula was also changed from 10 percent to 50 percent discount on the shares‚ closing price on pricing date, to 10 percent to 30 percent discount on the last 10 trading days’ volume-weighted average price.

The manner of payment has also been revised from an option for full payment or 50-50 payment scheme after 180th day to one-time or full payment on closing date.

The new terms and conditions of the stock rights offering will be subject to approval of the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE).

Megaworld is hoping to raise at least P10 billion from its proposed stock rights offering in the first quarter of 2007. Bulk of the sales proceeds or P4 billion will go to the development of the hotel, retail and office components of Cityplace, Megaworld’s first project in Manila’s Chinatown.

About P3 billion has been earmarked for landbanking activities, P2 billion for working capital requirements and the remaining P1 billion for the continued expansion of its business process outsourcing office space in Eastwood, Libis. The company is building E-Commerce Plaza within Eastwood to meet the growing demand for BPO space.

The rights shares will come partly from the company’s unissued authorized capital stock and its P10-billion increase in capitalization.

Megaworld is eyeing a 66-percent growth in its net profit this year to P1.9 billion from only P1.17 billion a year earlier.

In the first nine months of the year, Megaworld’s net income amounted to P1.5 billion, 92 percent higher than a year ago level. Revenues jumped 62 percent to P6.4 billion, mainly driven by strong real estate sales of residential condominium projects in its large-scale developments such as McKinley Hill and Forbes Town Center in Fort Bonifacio, Taguig City, and Eastwood City in Quezon City.