DoubleDragon acquired 35% stake in Merrymart

On the day before the Holy Week trading break, MerryMart [MM 0.60 ?25.0%; 639% avgVol] [link] announced that its affiliate, DoubleDragon [DD 9.88 ?17.2%; 214% avgVol], had acquired a 35% stake through the purchase of secondary shares from MM’s owner, Injap Sia. Under the terms of the deal, DD will pay P1.28 billion for the stake, using 50% DD shares (at P9.30/share price) and 50% cash. The transaction values MM’s shares at P0.48, and triggers a mandatory tender offer by DD of MM’s shares at that same valuation. MM is owned by Injap Sia. DD is owned by Injap Sia and Tony Caktiong, with Injap Sia acting as DD’s Chairman. 

  MB BOTTOM-LINE:  Looking back, this move makes a lot of sense, but if I’m being honest, this disclosure surprised me when I saw it first mentioned in the forums. MM is a retail distribution point with a multi-format footprint that can be configured to include pharmacies, grocery stores, or convenience stores. That kind of thing is an easy plug-and-play to almost any development that DD might undertake, whether it be more township in nature or just another commercial/industrial park. The controversy comes from the acquisition price, which is a shade less than half of MM’s IPO price. Lots of shareholders are upset in the forums about the tender offer price being at P0.48/share when MM’s IPO was at P1.00/share. While it always sucks to lose money, the stock market isn’t a barangay-level wealth ponzi scheme built to deliver “blessings” to low-effort investors. There are no guaranteed returns. I’m even less sympathetic considering how MM IPO buyers had around 3.5 years of MM trading either above or significantly above that IPO price. It ended its first year at around P2.50, and didn’t fall below P1.00 until January 2024. If anyone thinks that DD acquired MM for a sweetheart price, then they are still free to buy up MM shares on the open market. In a way, that’s what DD is doing right now. They think the market undervalues the stock, so they’re using that undervaluation as an opportunity to pick up some shares.

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