Dennis Uy sells control of 2GO to SM Investments in P6.6-billion buyout

MANILA, Philippines — Davao-based tycoon Dennis Uy is turning over control of 2GO Group Inc. to the Sy family as he moves to shield his empire's balance sheet from losses incurred by the listed shipping and logistics firm amid the pandemic.

In a disclosure to the stock exchange on Friday, Uy's Chelsea Logistics and Infrastructure Holdings Corp. said it would sell its 31.73% interest in 2GO to Sy-led SM Investments Corp., which currently holds a 30.49% stake in the firm. The buyout price is set at P8.50 per share.

The transaction, valued at P6.6 billion based on Reuters' estimate, would make 2GO a subsidiary of SM Investments. The Sys are targeting to conduct the mandatory tender offer to remaining shareholders on or before March 22 to firm up its control over 2GO.

Explaining Chelsea's exit, Chryss Alfonsus Damuy, company president and chief executive, said letting go of loss-making 2GO would help Chelsea get back on its feet faster as the entire shipping industry continues to sail into the coronavirus storm. Financial results showed 2GO's nine-month net loss widened to P1 billion last year from P973 million losses recorded in the same period in 2019. 

"With the divestment, Chelsea will not be impacted by 2GO losses, which will aid the Company in recovering from the current COVID-19 pandemic," Damuy said.

Chelsea targets to finish offloading its shares in 2GO "within the next three months," the company said. Proceeds from the sale will go to repayment of debts incurred when Chelsea acquired 2GO in 2016.

If anything, the move was not surprising at all since Uy himself floated in April last year the possibility of selling his stake in 2GO after the pandemic only compounded an already rough sea in the past years.

In 2018, Chelsea reported a net loss of P550.53 million, a reversal from the preceding year's P161 million net profit. Chelsea did not disclose its net income in 2019 and only said it "was not able to achieve profitability" that year after a record revenue growth was offset by high costing of ships.

Chelsea is yet to report its financial performance for entire 2020 but in the first nine months, the company disclosed a net loss of P2.6 billion after movement restrictions to break virus contagion sent passenger travels "at their lowest" while cargo movements "materially declined."