In view of this, the Philippine Stock Exchange (PSE) imposed a trading suspension on shares of Fortune Cement pending the release of additional information on the cement manufacturer’s merger with Continental.
Fortune Cement’s stock was last traded on May 5 at P0.62 per share.
In a disclosure to the PSE, Fortune Cement said the merger will simplify the legal structure and promote significant cost efficiency improvements such as the extension of the company’s market coverage to the Northern Luzon area, complementing its already strong market position in the Southern Luzon area.
The merger will also result in the consolidation of two well-established brands - Fortune and Continental - for a single statutory audit and reportorial requirements. It is likewise seen to enhance credit rating as a result of a larger market share and asset base.
Under the plan, Fortune Cement shall issue 1.19 billion common shares to Republic Cement Corp. in exchange for all the issued and outstanding shares of Continental. Fortune Cement will be the surviving corporation after the merger.
The exchange ratio for the proposed merger was based on the net asset values of the company and Continental per audited financial statements as of April 30, 2005.
In order to accommodate the issuance of shares, Fortune Cement shall raise its authorized capital stock from P3.032 billion to P4.23 billion divided into 4.2 billion common shares and 32 million preferred shares, both with a par value of P1.
The board of Fortune Cement likewise agreed to use the company’s existing additional paid-in capital and the deposit for future stock subscription to wipe out the existing deficit of the company as of April 30, 2005 amounting to P4.95 billion.
Continental is engaged in the business of manufacturing cement and is presently owned by Republic Cement Corp., which also owns majority of the outstanding capital stock of Fortune Cement.