Davao-based businessman Dennis Uy has diversified into the convenience store business with a deal to buy the 67-store Philippine FamilyMart chain through his petroleum trading and distribution firm, Phoenix Petroleum Philippines Inc.
The Ayala and Tantoco groups signed on Oct. 30 a memorandum of understanding to sell five-year-old Philippine FamilyMart CVS Inc. (PFM), the Philippine franchisee of the FamilyMart brand of convenience stores.
The buyer, Phoenix, is the country’s leading independent oil company with a network of retail stations and commercial and industrial clients all over the Philippines.
Phoenix’ potential acquisition of PFM is seen to complement its retail fuel business, with 518 stations nationwide. Shares of Phoenix—the day’s most actively traded stock—rose by 0.7 percent to close at P11.50 per share yesterday after the deal was announced. This gave it a market capitalization of P15.54 billion.
“Philippine FamilyMart has built a reputation for convenience and fresh, quality offerings. We are pleased to have it as a strategic addition to the group as we broaden our products and services and offer greater convenience to our customers,” said Phoenix president and chief executive officer Dennis Uy.
SIAL CVS Retailers Inc. currently owns 60 percent of PFM while Japanese companies FamilyMart Co. Ltd. and Itochu Corp. own 37.6 percent and 2.4 percent, respectively.
Ayala Land Inc. and the Tantoco family-led SSI Group each owns 50 percent of SIAL CVS.
“The divestment of FamilyMart would have no material impact on Ayala Land given the size of its profit, which amounts to P11.5 billion in the first half alone. Meanwhile, this would benefit SSI’s bottom line numbers considering that the joint venture has been a drag to SSI’s profit,” leading online stock brokerage COL said in a research note.
COL said that for the first half, SSI booked P37 million in joint venture losses from PFM.
“Note that losses are still expected to continue for PFM going forward as FamilyMart needs around 400 stores to break even,” COL said.
PFM’s losses as of first half of 2017 hit P145 million.
“We are proud to have introduced FamilyMart to the Philippines. Filipinos have really embraced the convenience store format and FamilyMart is well positioned as one of the top CVS brands in the country,” said Anthony Huang, SSI president and CEO.
Jose Emmanuel H. Jalandoni, Ayala Land senior vice president, said: “We are delighted that Phoenix Petroleum shares our vision for the continued growth of the FamilyMart brand in the Philippines. We believe that they have a robust platform for taking FamilyMart to the next level and will be excellent stewards of the brand moving forward.”
The transaction will be subject to the approval of the Philippine Competition Commission, the country’s antitrust body which is mandated by the Philippine Competition Act to review mergers and acquisitions valued at P1 billion and above, to ensure that these deals will not prejudice the interest of the consumers.
UBS AG Hong Kong Branch acted as financial adviser to the sellers in this transaction.
The sale of the local FamilyMart chain signals a shakeout in the highly competitive local convenience store business. In the last six years, new brands have entered the local market to challenge the two leading players—Philippine Seven Corp.’s 7-Eleven and Mini-Stop of Robinsons Retail Holdings Inc.
Aside from FamilyMart, the Puregold group earlier brought the Lawson brand into the local market while the SM group introduced Indonesian brand, Alfamart. Real estate magnate Manuel Villar has also built his own convenience store network using the brand “All Day.”
To date, 7-Eleven and Mini-Stop remain the leading market players. 7-Eleven has breached the 2,000-store network in the country while Mini-Stop has at least 500 stores.
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