Expansion Plans To Continue Aboitiz Transport System sale fails to push through

CEBU, Philippines – Aboitiz Equity Ventures (AEV) and its principal stockholder, Aboitiz & Company Inc. (ACO) confirmed yesterday that it will continue to operate its shipping business that is over 100 years old after probable buyer KGLI-NM withdrew the planned purchase of the company’s common shares.

KGLI-NM informed AEV yesterday noon that it will not pursue with its plan to buy Aboitiz Transport System (ATS), after it failed to pay the US$30 million partial payment that was due yesterday.

The US$30 million is the minimum payment required by AEV for its first installment of the total P4.5 billion equity value of ATS.

“We are going to operate and continue the business [transport/shipping] business as if we are going to keep it,” said AEV chief finance officer Steve G. Paradies in an emergency press conference held yesterday at the Aboitiz Group headquarters.

According to Paradies, KLGI-NM Holdings reasoned that the current constraints in the debt markets prompted its decision to put off the acquisition plan.

“They have informed us in writing that they have the US$30 million, but they said it will be difficult for them to raise the 51 percent balance,” he said.

Although, AEV understands the challenging debt market today amid the global downturn, Paradies said, their company will no longer be extending the deadline.

ATS, which is one of the core businesses of the Aboitiz Group, was offered for sale last year after KGLI-NM expressed its serious interest to buy the company.

However, with this failed attempt, Paradies said that the group will continue to expand its transport business, with focus on expanding its logistics and cargo operations.

“In view of the KGLI-NM’s decision, the deal is now terminated,” Paradies said.

He also said that AEV and ACO will keep the P100 million option money, which was tendered by the KGLI-NM upon expressing its interest to buy-out ATS.

A total of P17 million will be given to ACO and P83 million will be put as a non-recurring income for AEV, and will be recorded in the first quarter report of the company.

Paradies emphasized that the Aboitiz Group is not interested to put ATS for sale saying, “we never looked for a buyer in the first place. The buyer approached us.”

This time though, the transport business is on a brighter track.

Last year, ATS posted an encouraging growth as well as in the first three months of 2009.

“The picture is different today. Things have changed, the second quarter looks strong,” he said.

He added that if there is another interest party that may offer to buy the company, it will be carefully evaluated.

In fact, Paradies said, expansion plans for ATS will continue. This include modernizing the fleet and further partnership with international logistics and cargo chains to expand its network globally.

ATS is seeing growth potential in the cargo and logistic services, over passenger with the stiffer competition with airline companies, he said.

The entire ATS unit of the Aboitiz Group has over 1,500 employees. Paradies assured of “business as usual” for the ATS operation across the country. – Prudepida Mausisa Dago-oc/NLQ (THE FREEMAN)