8990 Holdings buys Cebu-based developer for P88 million
8990 Holdings [HOUSE 10.48 0.77%] [link] revealed that it had entered into an investment agreement with several shareholders to acquire 68% of the common shares of Piccadilly Premier Land (PPL), a Cebu-based mid-market affordable home developer.
HOUSE said the transaction will “broaden its reach” through PPL’s existing portfolio of “affordable-priced projects”.
HOUSE will pay for its shares in cash once some parcels of land have been transferred into PPL and HOUSE has completed its due diligence.
MB BOTTOM-LINE
I like to see it when companies acquire companies, projects, or assets that exist outside of their immediate ecosystem.
That said, I don’t know anything about PPL or the shareholders involved, so there could be greater overlap on this deal than is apparent right now.
One thing that is worth noting here is that this is a share purchase, not an asset purchase.
In an asset purchase, a company buys a “thing”, and when it buys that thing, the thing comes with a very limited set of potential problems that are usually well-documented. In a share purchase, a company buys a slice of the legal entity that owns all the assets, and also all the liabilities.
The set of potential problems is no longer limited at all; purchasers have to think about existing liabilities as well as potential liabilities, and this is where due diligence becomes crucially important.
Are there current legal problems or even the potential for legal problems?
Are there issues with BIR, DOLE, or Customs?
Are there any potential liabilities for environmental issues?
Is the company exposed to any potential contractual disputes with vendors and clients?
This “opening of the kimono” by PPL, where it bares all of its books to HOUSE, can be a tense process.
It’s probably why there are far fewer arms-length deals done in the Philippines as compared to more developed markets.
Fingers crossed that everything goes well, because if this is an arms-length deal, I’d love to see more like this.
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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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