The Californian-based company which has four outlets in Manila said it was selling its 52-percent interest in PriceSmart Philippines to minority shareholder E-Class Corp. in exchange for the dismissal of all charges filed against the American warehousing giant and its officials.
According to the statement the sale is expected to be completed by Aug. 20, 2005.
Under the terms of the agreement, PriceSmart has agreed to transfer its shares in PriceSmart Philippines to E-Class Corp. on the condition that all pending litigation in the Philippines and US is dropped and that it indemnify PriceSmart for all claims relating to the business in the Philippines including $9.5 million of debt.
PriceSmart’s chief executive officer Robert Price said in the statement that the company could now "heave a sigh of relief" as the shareholders squabble had made it difficult for the company to earn profits in the Philippines.
"During the past few years, our management team has worked very hard to reach profitability in the PriceSmart Philippines operation. Unfortunately, we have not been successful," Price said.
He added that PriceSmart was likely to experience improved financial results by the elimination of operating losses and negative cash flow associated with the Philippines.
The warehouse retail company expects to write off $20 million if the sale goes through.
PriceSmart was the first foreign investor in the local retail industry when the government allowed foreigners to set up retail shops in 2000.
It controlled 52 percent of PriceSmart Philippines while E-Class Corp. owned by local businessman William Go owned 38 percent. First Metro Investments Corp. owns the other 10 percent. — AFP