Merkado Barkada
November 11, 2024 | 8:52am
Puregold [PGOLD 32.00 ?3.4%; 76% avgVol] [link], Lucio Co’s large-format grocery store company, announced that its board approved the acquisition of “Puremart stores” (PMART) from a company called Tower 6789 Corporation, which is a subsidiary of League One Inc, which is 100% owned by the Co Family. PGOLD said that PMART has “at least 120 to 130” stores located “across Metro Manila, CAMANAVA, Rizal, Bulacan, and South Luzon”, and that PMART has a book value of “up to PHP 567.5 million”.
MB BOTTOM-LINE: I tried to take a look at the PMART website (puremart.ph), but it’s been “undergoing maintenance” since at least 2021, so no luck there. Lucio Co doesn’t have to disclose to the public how much he will cause PGOLD shareholders to pay to buy these stores from his family. because the purchase price is “substantially below” the value threshold (>10% PGOLD’s book value) that would require PGOLD to report such a figure. The best we can say is that PGOLD is adding a bunch of smaller-format mini-stores to its portfolio, putting PGOLD in competition with the likes of MerryMart [MM 0.67 ?1.5%; 62% avgVol] (down 44% over the past two years), AllDay Marts [ALLDY 0.14 unch; 48% avgVol] (down 42% over the past two years), and Philippine Seven [SEVN 72.70 ?3.8%; 91% avgVol] (up 110% over the past two years). Of these three, the PGOLD/PMART combo is more like MM and ALLDY than it is like SEVN, in that SEVN is a stand-alone convenience store brand with no “big daddy” grocery store format hovering above it to influence its customer base or product selection. If PGOLD’s goal is to grow its own mini-store segment, is this the best use of PGOLD’s assets to achieve the goal, or just the best use of PGOLD’s assets for the Co Family? This is a question that is always valid to ask about related party transactions. Is PMART the right choice, or just the only one they really know anything about?
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