AB Holdings seeks additional equity from investors

AB Holdings is in talks with both local and foreign investors for the possible infusion of new money into the firm, a company official said.

The entry of new funds, however, is not a precondition to the company’s plan to buy out Metro Pacific Investment Corp.’s majority stake in real estate company Landco Pacific, the official said.

The company official who declined to be named told The STAR that while the entry of new investors will be a welcome development, AB Holdings will have sufficient funds to buy out MPIC’s majority 51-percent stake in Landco.

MPIC earlier announced it has approved the divestment from Landco, signaling the holding company’s exit from the real estate business.

MPIC said the decision will allow the company to focus on its infrastructure and hospital businesses. MPIC has a controlling stake in Maynilad Water Services, which has been granted the concession to provide water services in the west zone of Metro Manila. It also controls Manila North Tollways Corp. after buying out the stake of the Lopezes. MNTC operates the North Luzon Expressway.

AB Holdings, which owns 49 percent of Landco, is now in talks with MPIC to iron out an agreement on the possible buyout by AB Holdings of MPIC’s stake.

“But of course, the purchase price and the terms of payment have to be reasonable to us. If we cannot come up with an agreement, then there’s a possibility that MPIC’s stake in Landco will remain,” the AB Holdings official said.

The book value of Landco as of end-2007 was placed at P1.5 billion although both parties are in the process of reviewing the valuation. The basis for valuation for purposes of the sale has not yet been decided.

According to the official, the talks with some of the prospective investors are proceeding well, although they are not sure whether any agreement can be concluded when the call period for the buy out, which is at the end of this month, comes.

“This means that with or without new investors, we will have to decide by the end of this month whether or not we will buy out MPIC from Landco,” the official said.

According to MPIC, Landco’s financial results for the three quarters of 2008 have been disappointing. Landco provided P9 million of core income to MPIC, compared with a contribution of P69.7 million for the same period in 2007.

Landco reported a core income of P17.8 million in the first nine months of 2008 versus P136.8 million during the same period in 2007. The substantial decline in core income wass attributed to the 24-percent reduction in revenue recognized from real estate sold from P1.32 billion in 2007 to only P1.01 billion in 2008.

Delays in construction for the period impacted negatively on its ability to recognize those revenues. While cost of sales and operating expenses remained flat at P1.2 billion,

selling expenses grew 40 percent with the launching of several new projects.  

In October 2008, Landco launched Playa Azalea, a joint venture project with Anflocor Management and Investment Corp. of the Florendo family located in Samal Island, Davao. The 33-hectare project, which is going to be the first leisure tourism estate in Davao, will be a world class mixed-use seaside commercial- residential enclave offering a magnificent view of Mt. Apo.

Company officials told the STAR that aside from a possible new residential project in Binangonan, Rizal, Landco will just focus this year on expanding developments in existing areas such as Playa Azalea, Calatagan, in Batangas and Hacienda Escudero in Quezon which still have huge portions of undeveloped areas.