MerryMart provides substantial disclosure, gets suspension lifted
The details provided by MerryMart [MM 3.25 0.31%] were basically in-line with what was reported by the company in its initial disclosure, except to provide some payment details for the P339,815,564.80 that MM paid for its 75.08% stake, and a little background to why MM’s post-transaction stake increased from the 67% it originally said that it would buy in July.
On the payment details, MM already paid 40% of the price in cash on November 8, 50% will be paid once all the conditions precedent are cleared (like permits and approvals for changes to Carlos Superdrug’s articles of incorporation), and the final 10% will be held by MM and released over the next three years.
On the stake increase, the disclosure revealed that the deal calls for MM to buy 71.96% of Carlos Superdrug from the selling shareholders (the secondary shares), but that MM will also buy an additional 3.12% of Carlos Superdrug from the company itself in the form of primary shares to be issued by Carlos Superdrug.
This will push approximately P50 million to Carlos Superdrug, for that company to use in whatever way MM deems appropriate.
The disclosure allowed the PSE to lift the suspension at around noon; the stock immediately had a bunch of trades clear at/around P3.68/share (~13% gain) before quickly settling back down to pretty much where it was before the suspension.
MB BOTTOM-LINE
Great little bit of detail there on the primary stock purchase; while we have no guidance on how MM will cause Carlos Superdrug to use this money, perhaps MM has plans to make some alterations/renovations to the 27 existing Carlos Superdrug locations.
Makes sense, given that MM will consider these locations to be MM locations going forward.
The 10% hold-back looks like an earn-out, which allows the purchaser to hold back a portion of the final sale, and release that over time in accordance with a schedule of deliverables from the selling side, usually relating to the transfer of client/vendor relationships and perhaps some training provided by the seller to the buyer’s staff.
An earn-out can be a very effective way to help ensure a smooth transition of control, especially in situations where the company is family-owned and a lot of the knowledge is held with individuals and not in well-established procedures.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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