Ayala Corp. is considering spending up to P10 billion of its expected proceeds from the Mitsubishi Corp. deal to buy Ayala Land Inc. (ALI) shares, which it believes are deeply undervalued.
Cezar Consing, president and CEO of Ayala, told the Inquirer that ALI would be the top priority as the conglomerate weighs purchases of shares in its operating companies alongside debt repayment.
Asked how much of the approximately P20 billion Ayala expects to receive could go to ALI, Consing said: ‘Well, maybe up to half [of that amount].’
The purchases would involve existing ALI shares in the stock market rather than a subscription to newly issued shares.
‘We won’t be injecting it into primary shares of ALI,’ Consing said. ‘Just because we think it’s so beaten down. There’s no reason it should be trading like that.’
Consing declined to give a timetable, citing limited market liquidity that could affect how quickly Ayala could accumulate shares.
‘I think it’ll be gradual. But the message is that ALI is undervalued,’ he said.
‘We think the whole group’s undervalued. We think every major Philippine conglomerate is probably undervalued.’
Even before the Mitsubishi deal was announced, Ayala had already earmarked P5 billion for additional purchases of ALI common shares, including P2 billion from its approved capital expenditure budget for investments.
Deal with Mitsubishi
The planned purchases would form part of Ayala’s use of proceeds from the approximately P44.5-billion transaction announced with Mitsubishi last month.
Priced at P650 per common share, the deal combines primary and secondary shares, including a voluntary tender offer.
Upon completion, Mitsubishi’s economic ownership in Ayala would rise to 15 percent from 4.7 percent, while its voting stake would reach 20 percent.
With the proceeds, Ayala intends to reduce debt, purchase shares in itself and its listed subsidiaries, and support growth initiatives.
As part of the transaction, Ayala plans a voluntary tender offer on Mitsubishi’s behalf for up to approximately 30 million Ayala common shares at P650 each.