SM Investments Orders Trading Halt, Boosting Merger Speculation

SM Investments Corp. (SM) and its property units sought a trading halt at the Philippine Stock Exchange, fueling speculation that the group will announce a merger of its real estate assets that will create the country’s largest developer.
SM executives including SM Investments Vice Chairwoman Teresita Sy-Coson have said previously a decision to merge will be known this year. The voluntary trading suspension is most likely about the group’s decision to combine its property assets, said Rico Gomez, fund manager at Rizal Commercial Banking Corp., and James Lago, analyst at PCCI Securities Brokers Corp.
Sy-Coson couldn’t immediately be reached for a comment at her Manila office. SM Prime Holdings Inc., the company’s mall developer, said in an e-mail invitation a briefing will be held today at 1 p.m., local time. No details of the event were given.
“Based on preliminary talks and initial sound-off by the group, consolidating the property assets under one umbrella is beneficial as it enhances the value and strength of these ventures,” said Gomez, who helps manage $2.8 billion at Rizal Banking in Manila. “This has to be confirmed once details of the merger are finalized.”
Manila-based SM Investments, the holding company of Philippine billionaire Henry Sy, owns the nation’s largest shopping mall operator SM Prime and residential tower builder SM Development (SMDC) Corp. SM Prime and SM Development are two of Sy’s four publicly-traded developers, with a combined market value of 484.4 billion pesos ($11 billion), more than Ayala Land Inc. (ALI)’s 464.2 billion peso capitalization.

Rationalizing Business

SM Investments fell 4.4 percent to 1,119 pesos yesterday, while SM Prime sank 2.5 percent and SM Development lost 4.2 percent.
SM Investments’ other listed property companies include Highlands Prime Inc., a builder of a mountain resort south of Manila, and Belle Corp., which is building a Manila casino resort complex with Melco Crown Entertainment Ltd. The company’s property assets include hotel resorts, offices, convention centers, a 16,000-seat sports arena and a 6,000-hectare beach and mountain resort in Batangas, a province south of Manila.
Belle, which wasn’t suspended from trading, fell 0.6 percent to 6.24 pesos as of 11:24 a.m. in Manila trading.
“This consolidation is clearly intended to rationalize the group’s property business ,” said Lago, head of research at Manila-based PCCI Securities. “On the one hand, you have property sales that are explosive and volatile and rental income, at the other, which is steady and predictable.”
Sy, who migrated from China in 1936, has an estimated net worth of $16.3 billion as of yesterday, according to the Bloomberg Billionaires Index. He ranks 45 in the list.