October 14, 2013

SEC approves SM group consolidation plan

SM Prime Holdings Inc disclosed last Friday that the SEC has approved its merger with SM Land Inc, the increase in its authorized capital from P20b to P40b, and the change in its primary business purpose into mixed-used property development.

The SEC has also approved the planned issuance of SMPH shares in connection with the merger with SM Land, the share-for-share acquisition of various companies within the SM group, and the issuance of shares to SM Investments Corp in a property-for-share swap for the latter’s various real estate properties.

Our take: In a previous briefing, SM Prime indicated that the pro-forma aggregate appraised value of its real estate assets will increase by around 59% to P559.1b while its net income base can potentially expand by 56% to P17b after the consolidation.

Net gearing can potentially go down to 40% from 57%. Thus, the expansion in its asset and income base should help temper the effect of the potential share dilution arising from the expanded share capital.

SM Prime has yet to disclose the post-consolidation outstanding shares which we believe will include the retirement of certain shares into treasury. - WealthSec