CITING difficulties in raising funds due to constraints in the debt markets, the buyer of the shipping arm of the Aboitiz group
decided not to push through with its plan to purchase the entire Aboitiz Transport System Corp. (ATS).

KGLI-NM Holdings Inc. yesterday informed the Aboitiz group in writing that it would not proceed with the purchase of the 42-percent ATS common shares owned by the Aboitiz Equity Ventures (AEV) and Aboitiz & Company, Inc. (ACO) worth at least $30 million.

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This guarantees the more than 1,000 workers of ATS that Aboitiz still retains control over the shipping company. AEV and
ACO have combined shares of roughly 93 percent in ATS.

“The deal is off. We are not giving any more extension. The P100-million option money paid by KGLI-NM to AEV and ACO is forfeited,” announced AEV chief financial officer Stephen Paradies yesterday afternoon in a press conference.

KGLI-NM had until yesterday to acquire the 42-percent stake. If it had pushed through with the acquisition, KGLI-NM would have gotten the remaining 51-percent stake owned by AEV and ACO until Sept. 30, 2009.

Coverage

The purchase price would have been based on the total equity stake of ATS of P4.5 billion, equivalent to P1.84 per share.

The supposed acquisition only covered the shipping and logistics businesses of ATS, including Superferry, Supercat and 2GO. It did not include the Aboitiz Jebsen Group of Companies-Aboitiz Jebsen Bulk Transport Corp., Aboitiz Jebsen Manpower Solutions Inc., Jebsen Maritime Inc. and its pool company in Australia.

Paradies disclosed that KGLI-NM had $30 million but saw difficulties in raising the balance, so it decided not to put in the money as it was not sure about its ability to acquire the entire company.

“We will run ATS as if there was no buyer. We will continue to operate it as one of our core businesses. We never went out to look for a buyer in the first place. KGLI-NM came to us,” he said.

The board of directors of AEV unanimously voted to accept the unsolicited offer of KGLI-NM to buy all of ATS’ shareholdings in Sept. 23, 2008.

Better

KGLI-NM is a domestic company, which is jointly owned by Negros Holdings and Management Corp. and Dutch-owned KGL Investment BV.

“Things have changed. Business is doing much better now. We are going to report a good first quarter and the second quarter looks quite strong. We will evaluate any offers but we will not go out looking for buyers. We will continue with this (shipping). The company (ATS) is not for sale right now,” said Paradies, adding that no one else has approached them to make any unsolicited offers.

He said the company had not decided what to do with the proceeds of the acquisition had it pushed through, but paying off some debts and investing in the power sector would have been among the options.

ATS, said Paradies, will continue to expand its cargo capacity by upgrading its fleet and systems and bringing in a couple of medium-sized vessels to operate in Cebu and northern Mindanao.

He said the company has decided to reduce passage capacity of its vessels due to “fierce” competition with the airline companies. It had reconfigured five of its more than 10 ferries that have already been operating in higher load factors.

Paradies also said that the logistics business 2GO is growing as ATS recently entered into joint venture with Kerry Logistics, an Asia-based logistics service provider with strong presence in China. The venture, which is still being finalized, will be under Aboitiz One, a wholly owned subsidiary of ATS.

Paradies also disclosed that express carrier and package delivery company UPS (United Parcel Service Inc.) recently appointed ATS to be its agent in the Philippines to handle parcel courier services.

ATS will also become part of the supply chain of ScanAsia Overseas Inc., an importer and distributor of fine food products and beverages in the Philippine market.