Gokongwei’s story (1) – Manila Standard

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After 76 years of entrepreneurship and 60 years of shepherding his company into becoming one of the largest and most dynamic conglomerates in Asia and Oceania, John Gokongwei Jr. has been cited by the Management Association of the Philippines (MAP) as its “Management Man of the Year” for 2017.

Not that the award would make much of a difference in Big John, 91.  His being among MAP’s Management Man of the Year awardees lends prestige and sheen to the award, not the other way around.  Gokongwei has chalked up an incredible record more as an entrepreneur rather than as a management man.

Gokongwei is the founder and chair emeritus of JG Summit Holdings, Inc., incorporated in 1990, and the family holding company where he has 60.3 percent control—27.88 percent through Gokongwei Brothers Foundation, 14.43 percent through Robinsons Bank, and 18 percent through various family holdings.

In the first half of 2017, JG Summit had revenues of P134 billion, up 12.6 percent; net income of P14.64 billion, down 16.5 percent.

In the whole of 2017, JG had revenues of P240 billion, up 5 percent; profits P10.9 billion, were down 51 percent.

In 2001, John announced his retirement and handed the reins to youngest brother James, now 71, (the chair and CEO of JG Summit), and only son Lance, 50, president and COO.

JG has about nine companies and businesses.  They include Universal Robina, No. 1 in branded snack foods; Robinsons Land, No. 2 in malls with at least 44 malls; Cebu Pacific Air, No. 1 domestic airline with 58.5 percent market share; an 8 percent ownership of PLDT worth P29 billion; a 27.1 percent ownership in Meralco worth P71.24 billion; a 37 percent ownership of land developer UIC in Singapore worth P42.6 billion; 100 percent ownership of Robinsons Bank which the group hopes to become of the ten largest banks locally; and 30 percent in Global Business Power Corp. worth P12 billion.

Group businesses are remarkable for balance and discipline and exude what they call a “vibrant entrepreneurial culture”.  A third is in branded foods (URC), a third in core investments (PLDT and Meralco), and a third in Cebu Air and Petrochemicals.

In the second decade of the 21st century, Gokongwei made a strategic decision.  JG Summit must grow and thrive through acquisitions.         In 2011, the group acquired, through share swap, 12 percent of PLDT valued at P69.2 billion; 4 percent was later sold for $500 million. 

In December 2013, JG Summit bought 27 percent of Meralco for P71.9 billion from San Miguel Corp. which netted P40 billion for the beer, food, and infra conglomerate.

Food subsidiary URC’s biggest acquisition was made in 2016, NZ$742 (P26.25 billion) for Griffin’s Foods, No. 1 snack foods company in New Zealand.   Combined with its own snack foods, JG’s purchase of Griffin gives it scale to tap the ASEAN, Greater China and Oceana markets.

From 2011 to 2017, the PLDT investments raked in P17.96 billion in dividends for JG Summit.  That’s a return of 26 percent from the P69.2 billion (or 12 percent) invested in PLDT in 2011, aside from the $500 million (P17.67 billion in 2011) earned from the sale of the 4 percent.  Today, JG Summit’s 8 percent share is valued at P29 billion as PLDT share price has skidded 14 percent from its 12-month high of P1,944 to P1,710 valuing the telco at P362.75 billion.

In 2011, 8 percent of PLDT was worth P46 billion.  Today, that is worth only P29 billion, a drop of P17 billion.  But JG Summit collected P17.96 billion in dividends from 2011.  That makes it even. So the P17.67 billion made from the sale of the 4 percent is the profit so far from the PLDT stake that is now valued at only P29 billion.

In Meralco, JG Summit has done much better.  It has collected P24.11 billion in dividends from Luzon’s power distribution monopoly, giving JG a return of 33.5 percent from its P71.9 billion acquisition cost for its 27.1 percent.  Plus, the Meco stake is valued today at P88.57 billion, up P16.67 billion (23 percent) from JG’s P71.9 billion acquisition cost. The P24.11 billion dividends plus the P16.67 billion rise in market cap of Meralco gives a total gain of P40.78 billion or 56.7 percent over P71.9 billion.

In honoring John, MAP, which has among its members the top 700 CEOs of the land, is saying that managing an enterprise is a much more difficult task than starting a new one as an entrepreneur.

Entrepreneurship sometimes borders on insanity.  One’s dreams or vision could be just delusion.  On the other hand, management deals with reality, the running of organizations to achieve desired objectives, to achieve progress.  

Entrepreneurship begins with a need, an urgency, an opportunity.

For John, it began when he was 13 when his rich father died suddenly, from complications due to typhoid. “Everything I enjoyed vanished instantly. My father’s empire was built on credit. When he died, we lost everything—our big house, our cars, our business—to the banks,” he recalls.

He had lived a gilded life.  He related: “I was born to a rich Chinese-Filipino family. I spent my childhood in Cebu where my father owned a chain of movie houses, including the first air-conditioned one outside Manila. I was the eldest of six children and lived in a big house in Cebu’s Forbes Park.  A chauffeur drove me to school every day as I went to San Carlos University, then and still one of the country’s top schools. I topped my classes and had many friends. I would bring them to watch movies for free at my father’s movie houses.”

All that vanished overnight.  What did John do?  “I worked,” he says. 

“My mother sent my siblings to China where living standards were lower. She and I stayed in Cebu to work, and we sent them money regularly. My mother sold her jewelry. When that ran out, we sold roasted peanuts in the backyard of our much-smaller home. When that wasn’t enough, I opened a small stall in a palengke.  I chose one among several palengkes a few miles outside the city because there were fewer goods available for the people there. I woke up at five o’clock every morning for the long bicycle ride to the palengke with my basket of goods.”

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