DMCI doubles down: 'No intention to delist CHP'

DMCI [DMC 11.10, up 2.2%; 72% avgVol] [link] clarified the reporting yesterday around the Consunji Family’s statements about its intentions with Cemex PH [CHP 1.37, up 0.7%; 55% avgVol], the subsidiary of the company that it just acquired for $305.6 million. In its clarification statement, DMC said that the “Consunji Group has no intention to delist CHP from the Philippine Stock Exchange, subject to the application of the above-mentioned transaction with the Philippine Competition Commission and subsequent undertaking of a mandatory tender offer of the shares of CHP held by its minority shareholders.” 

MB bottom-line: Your analysis of this statement comes down to whether you’re willing to take it at face value. The bit about the Philippine Competition Commission (PCC) we can probably ignore, since if the PCC process results in any adverse finding, the deal would be killed and CHP’s fate would no longer be in the hands of the Consunji Family at all. The intrigue comes from the mandatory tender offer. If only a tiny number of the minority shareholders sell into the tender, then CHP makes it through the tender process with enough of a public float to avoid suspension. If a small (but meaningful) number of minority shareholders sell into the tender, then CHP would be suspended for a minimum public ownership violation and the Consunji Family (through its CHP ownership group of DMC, SCC, and Dacon) would be forced to act to prevent delisting. Remember, all they need to do is make sure that CHP’s public float is above 10%. That’s a pretty easy task for the Consunjis if only a few shareholders sold into the tender; they might be able to arrange a quick sale of a small stake from Dacon to a third party in just a few days or pull a Sneaky Leviste and donate some CHP shares to some random non-profit controlled by some unrelated Consunji Family member. It gets more interesting, though, if many shareholders sell into the tender. The wording of the family’s statement (to me) gives it the ability to point to a big post-tender public float problem and be like: “Well, that’s not the outcome we were hoping for, and it was never our intention, but we knew it was always a possibility that we might have to delist CHP.” The reaction to the first tender offer notice should tell us quite a bit about which outcome we’re likely to see.

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