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BusinessWorld Tuesday, June 19, 2007
Investors seen going for RP stocks
Alliance Global calls offering a ‘landmark deal’

Holding firm Alliance Global Group Inc. raised $391 million yesterday in the country’s biggest secondary offering as the stock market hit a fresh all-time high and investors braced for more issues.

Earlier, Philippine Stock Exchange (PSE) chairman Jose Vitug said the bourse was on track for a new capital market record this year, with up to P75 billion ($1.63 billion) expected to be raised in initial public offerings (IPOs) and secondary offerings, up 31% from last year.

Political calm, a growing economy and low interest rates have encouraged investors to pile into the local stock market, creating a big funding opportunity for firms starved of equity interest since the Asian financial crisis in 1997-98.

Shares in Alliance Global, which has a 49% stake in the local McDonald’s franchise and also has real estate operations and food and beverage products, rose 11.3% after it raised P17.9 billion from the sale of 3.13 billion shares.

The offering was open to foreign and local investors.

"This equity offer is in may ways a landmark deal for both Alliance and the Philippines," Alliance Global president Kingson Sian said in a speech.

Speaking at a press conference after the listing, Mr. Sian claimed the secondary offering had actually raised $447 million, with most taken up by foreign investors.

"A lot of the foreign investors that have invested in us and those who lack exposure to the Philippines, they like the AGI story because it’s a conglomerate stock, so it mimics the economy," Mr. Sian said.

Alliance Global has said the proceeds from the share sale would be used to expand its liquor business, acquire new businesses in the food and beverage sector and pay off debt. The firm is involved in three main business segments: food and beverage, real estate and quick-service restaurants.

Of the 3.13 billion common shares sold, 1.8 billion shares were new and 1.33 billion were sold by shareholder Yorkshire Holdings, Inc.

In its prospectus, Alliance Global said 2.5 billion shares were offered to the international market while 626 million shares were offered to the domestic market.

The share offer ran from June 6 to 13.

Mr. Sian said that of the proceeds, P7 billion would be used to boost production of Alliance Global’s wholly-owned subsidiary, Emperador Distillers, Inc.

"We want to produce around 18 million cases this year and then next year further increase to 25 million cases," he said.

Currently, Emperador produces 15 million cases of 750 ml Emperador and 700 ml Generoso.

"There is a shift of preference and we believe that with the improving economy, with the more affluents, more power purchasing power consumers, there is a change in consumer pattern and behavior," Emperador President Winston S. Co said.

Meanwhile, P1 billion of the proceeds will be used for the creation of a new product in the food and beverage category.

Another P1 billion will be for the acquisition of a new business also in the food and beverage category.

Mr. Sian, however, declined to disclose what the acquisition would be.

Officials also said P1 billion was allotted to pay off a five-year peso debt that is maturing on 2012.

Alliance Global recently incorporated Emperador’s operations and increased its stake in Megaworld Corp.

As of the first quarter, the company posted P955 million in net income up 443% from P175.79 million in the same quarter the previous year.

Alliance Global shares have risen 31% so far this year.

Listed companies raised around P35 billion in the stock market in the first five months of the year, 41.5% higher than the same period last year.

The PSE’s Mr. Vitug claimed that companies were looking to list new and additional shares during the rest of this year worth P40 billion.

Manila’s stock market, previously seen as a regional laggard, has enjoyed a post-election sprint, with its main index reaching an all-time high of 3,680 points yesterday, surpassing the previous peak of 3,669 points recorded on Friday.

Banks, conglomerates and telecoms groups who bought back shares after the turmoil of the late-1990s are reissuing stock, often doubling their free-floats in de facto IPOs to take advantage of foreign investor interest. — reports from Reuters and L. N. P. Lee