MANILA, Philippines - Puregold Price Club, Inc. is acquiring the chain of S&R Membership Shopping clubs from the family of common controlling shareholder Lucio Co for P16.5 billion.
In a disclosure to the Philippine Stock Exchange, Puregold said its board of directors approved the submission of a binding offer to acquire 100 percent of the equity of Kareila Management Corporation.
Kareila, a company wholly owned by the Co Family, owns and operates the S&R membership shopping clubs in the Philippines.
The proposed acquisition will be through a share for share swap, with Puregold offering 450 of its shares for every outstanding Kareila share based on the closing share price of P21.50 per Puregold share last March 26, the day prior to the approval of the transaction by the Puregold board.
The proposed transaction will result in the issuance of about 766 million new shares in Puregold to the Co family and post completion, the Co family will own 77 percent of outstanding shares of Puregold.
The transaction is subject to approval by Puregold stockholders and will be voted upon at Puregold's annual stockholders' meeting on May 8, 2012.
Punongbayan and Araullo has provided a fairness opinion on the acquisition.
The S&R business was originally established in the Philippines in the
year 2000 as a joint venture controlled by US company PriceSmart. Following a sale of PriceSmart's stake in the joint venture to their joint venture partners in 2005, the business was subsequently acquired by the Co Family in 2006.
S&R is modeled after successful warehouse membership shopping chains in the US such as Costco. It operates 6 membership shopping stores in the Philippines with 4 stores in Metro Manila, 1 store in Cebu and the newest store in Pampanga which opened in November 2011.
S&R had total revenues of P4.1 billion in 2010 and P6.6 billion in 2011 implying growth of 61 percent, driven by the full year operations of the new store in Cebu as well as same store sales growth of about 39 percent.
In 2011, gross profit of S&R was P1.2 billion, implying a gross margin of 18.3 percent, EBITDA was P976 million implying an EBITDA margin of 14.7 percentand net income was P660 million, for a net margin of 9.9 percent.