Megawide, GMR sell shares in Cebu airport to Aboitiz Group

·5 min read

FILIPINO infrastructure firm Megawide Construction Corp. and New Delhi-based GMR Airports International BV (GAIBV) are divesting their stakes in GMR-Megawide Cebu Airport Corp. (GMCAC), the operator of Mactan-Cebu International Airport (MCIA).

This developed after Megawide and GMR executed a share subscription and transfer agreement with Aboitiz InfraCapital Inc. (AIC), for AIC to acquire shares in GMCAC worth P9.5 billion.

In addition, GMCAC shall utilize a portion of the primary infusion to acquire certain identified entities providing services at MCIA.

After several months of deliberations, Megawide and GAIBV are bringing Aboitiz into GMCAC as a strong and reputable investor with deep roots in Cebu to propel MCIA to the next level and establish its status as the Philippines’ premier international airport. AIC operates Mactan Economic Zone 2 Estate in Lapu-Lapu City and West Cebu Estate in Balamban, Cebu.

The transaction will result in Aboitiz Infra owning 33.33 percent minus one share of the outstanding capital stock of GMCAC.

Megawide will retain 33.33 percent and one share while GAIBV will retain 33.33 percent in the MCIA operator.

Based on the deal, Megawide and GAIBV will also issue exchangeable notes for the aggregate amount of P15,525,400,000, which will mature on Oct. 30, 2024.

The notes will be exchanged by Aboitiz Infra for the remaining 66.66 percent and one share of GMCAC’s outstanding capital stock.

The investment is a vote of confidence for the travel sector, which has been steadily improving in the past few months. Latest MCIA statistics show that it welcomed more than two million passengers during the first half of 2022, a 350 percent increase versus the 470,000 passengers in the same period of the previous year.

“We at Aboitiz InfraCapital are happy to partner with GMR-Megawide for the continued growth and development of the Mactan-Cebu International Airport. The GMR-Megawide Consortium has done a tremendous job by significantly expanding the airport over the pre-pandemic years – almost tripling passenger traffic in five years. This is quite an accomplishment in setting up a solid foundation for the future,” said AIC president and chief executive Cosette Canilao in a statement.

She said part of the larger Aboitiz Group’s push to transform into a techglomerate is to infuse and leverage the group’s relationships and assets as well as explore utilizing data scence and artificial intelligence through Aboitiz Data Innovation to tech up the airport’s operations. “We are excited to take MCIA to new heights which will bring in more progress to the province, region, and country.”

The GMR-Megawide joint venture partners for the 25-year concession agreement to develop, operate, and maintain MCIA.

“The transaction was accepted and deemed fair by all parties and aligned with their respective long-term goals. For GMCAC, the infusion provides it with more financial muscle, with a higher capitalization, bigger balance sheet, and an improved gearing ratio. It also paves the way for the entry of another experienced and strong industry player,” BDO Capital and Investment Corp. president Eduardo Francisco was quoted as saying in a statement released by Megawide.

“We have always been open to partnerships that will enhance our capabilities and diversify our portfolio as an infrastructure innovator. The company’s thrust of being an infrastructure innovator remains on track with this deal as we harness synergies with other major participants in the field,” Megawide chairman and chief executive Edgar Saavedra said.

Over the past years, the company revealed that it has been receiving interest from several parties to join its mission to modernize airport infrastructure in the Philippines, with the MCIA as the prototype.

“We believe that we will be able to achieve our objectives with someone who shares the same vision, has a strong local presence, and embraces the same passion for infrastructure development and national progress. AIC has deep roots in Cebu and MCIA deserves another world-class, Cebuano company to sustain what GMCAC has built so far, and take it to the next level,” said Louie Ferrer, GMCAC president and Megawide’s executive director for infrastructure development.

This move is also in line with Megawide’s strategy of constantly re-engineering its business and financial portfolio to support its vision of engineering a first-world Philippines.

“From Megawide’s perspective, the agreement enables us to crystallize the asset’s fair market value and helps unlock resources that will accelerate our developmental infrastructure portfolio and allows us to strengthen our balance sheet, as part of our long-term financial management program,” Saavedra added.

The company previously announced its direction to explore more resilient, high-growth, and scalable opportunities to anchor its long-term and sustainable growth agenda.

The company is exploring several transport-centric development locations to complement its hub-and-spoke model with the Paranaque Integrated Terminal Exchange and engaging in its own brand of urban renewal through the Carbon Market Redevelopment.

“In the medium-term, we are seriously looking at diversifying into other exciting and high-growth infrastructure platforms, where we can leverage our engineering and construction expertise. At the end of the day, we believe it is the further value creation, which the transaction unlocks, that makes it very rewarding and exciting, and something to look forward to,” Saavedra ended.

The transaction is subject to the satisfaction of customary closing conditions including requisite third party and regulatory approvals.

BDO Capital & Investment Corp. acted as financial advisor to, and Romulo Mabanta Buenaventura Sayoc & de los Angeles and Shardul Amarchand Mangaldas & Co. as legal counsels for, Megawide and GAIBV while AlphaPrimus Advisors acted as financial advisor to, and Gulapa Law as legal counsel for, AIC in this transaction.