May 1--KGLI-NM Holdings Inc., a joint venture between Negros Holdings Management Corp. and KGL Investment BV. of the Netherlands, has backed out of the planned acquisition of the Philippines' largest shipping company, citing its failure to raise ample capital.

In a disclosure to the Philippine Stock Exchange, Aboitiz Transport System Corp. (ATSC) said KGLI-NM will no longer proceed with the purchase of $30-million worth of common shares owned by Aboitiz Equity Ventures Inc. (AEV) and Aboitiz & Co. Inc. (ACO) in the shipping firm.

ATSC said KGLI-NM cited the current constraints in the debt markets as the reason for its decision not to push through with its planned purchase of the shares owned by AEV and ACO.

Stephen Paridies, AEV chief financial officer told reporters in a teleconference, "The deal is off. We are not giving them another extension."

KGLI-NM, which operates Negros Navigation, had informed AEV and ACO in March that it was exercising its option to purchase $30-million worth of ATSC shares from the two Aboitiz firms.

Under their agreement, KGLI-NM had the option to acquire a 51-percent equity stake from May 1 to September 30 this year, as well as the 7 percent held by the public for the same price of P1.84 a share.

"They [KGLI-NM] have the $30 million but they have difficulty in raising the balance because of the difficult market . . . They are not sure to get the balance," Paridies said.

Because of this, ATSC said the memorandum of agreement dated September 23, 2008, between AEV and ACO, on the one hand, and KGLI-NM, on the other hand, is deemed terminated.

In addition, the P100-million KGLI-NM paid for the option to acquire ATSC is also deemed forfeited in accordance with the terms of their agreement.

With the failed negotiations, Paridies said ATSC would continue to develop the Super Ferry brand to become the "preferred shipping company in the Philippines."

"The company is not for sale right now. We're not looking for a potential buyer right now," he said.

Justino Calaycay Jr. of Accord Capital Equities said the failed transaction will "potentially be a drag" to the group's earnings, especially since AEV is becoming more focused on its energy investments.

"[For] the interim, it set back their timetable and will definitely have an impact on their energy investments, " he said.

The analyst said the company's energy business is more profitable than the transport sector.

Last year, the shipping firm said its profit dropped 80.3 percent to P8.2 million from P420 million in the previous year.

The company's freight business recorded a 22-percent increase in revenues to P5.4 billion from P4.4 billion in 2007.

ATSC's passage business revenues amounted to P2.9 billion, unchanged from 2007.

The Aboitiz transport unit's market share in the cargo industry stood at 35 percent, while Negros Navigation had 10 percent. ATSC's passenger market share stood at 70 percent while Nenaco had 30 percent. --With Chino S. Leyco

-----

To see more of The Manila Times, or to subscribe to the newspaper, go to http://www.manilatimes.net.

Copyright (c) 2009, The Manila Times, Philippines

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

Philippines:PSE, Philippines:ATS, Philippines:AEV,

A service of YellowBrix, Inc.