June 1, 2013 — The SM group of companies has finalized plans to consolidate its P279-billion real estate businesses under mall operator and developer SM Prime Holdings Inc. which will become a property giant with a market capital of US$14 billion.

“Mr. Henry Sy Sr. has nurtured SM over the past 50 years from a Shoemart store in 1958 to become the Philippines’ leading conglomerate which, after this transaction, will hold one of the leading Asian real estate players today…. The enlarged SM Prime will be in a very good position to take the business up to its next phase of growth,” said SM Prime Chairman Henry Sy Jr.

In a press briefing, SM Prime chief finance officer Jeffrey Lim said the first step of the plan consists of exchange offers for the outstanding shares of SM Development Corporation and Highlands Prime Inc. which will be delisted.

Under the offer, SM Land, Inc. (SM Land), a privately held real estate subsidiary of SMIC, will offer SM Prime shares in exchange for the outstanding shares of SMDC and HPI at the rate of 0.135 HPI for one SM Prime share and 0.472 SMDC per SM Prime share.

The second step involves the merger of SM Land with SM Prime, with the latter as the surviving entity. The third step involves SM Prime’s acquiring specific real estate companies and assets currently held by SMIC in exchange for new shares in SM Prime (the second and third steps together, the “Reorganization”).

The Reorganization is subject to SM Prime’s stockholder approval where a vote of the stockholders owning at least two thirds of the outstanding capital stock of SM Prime is required.

It also hinges on the Securities and Exchange Commission’s approval of the increase in authorized capital stock to P40 billion from P20 billion for the issuance of new shares.

SM Prime has received support for the Reorganization from its major shareholders.

SM Prime will be led by a senior management team comprising of Henry Sy, Sr., as Chairman Emeritus and Henry T. Sy, Jr., as Chairman. Hans T. Sy and Lim will continue their existing role as president and CFO of the enlarged entity respectively.

SMIC executive vice president Jose T. Sio said “this landmark transaction is mutually beneficial for all the stakeholders. The broadened organizational capabilities of the new entity will give it the operational and financial muscle to create additional value in our asset base through accelerated and synergistic projects, not just among the property companies but also among the other core businesses of SMIC, which includes retail operations and banking.”

He added that “streamlining our real estate businesses under SM Prime would likewise allow SMIC to focus on pursuing new growth opportunities.”

SM Prime president Hans T. Sy noted that “the transaction will help leverage SM’s strong brand franchise and enable us to provide full breadth and depth of management expertise across all our business units. The gain of critical mass should generate economies of scale across various functions including land sourcing, master-planning and coordinated marketing efforts.”

Lim said the merged entity will have assets worth P284 billion, revenues of P57.4 billion, P17 billion in net income and a land bank of 920 hectares.

The consolidation is intended to create an integrated real estate company, which will allow the merged entity to undertake larger scale projects with the participation of all of its business units.

Its expanded scope, under a simpler and more transparent corporate structure, is expected by SMIC and SM Prime to create efficiencies and further crystallize the value of the SMIC’s real estate businesses.

The merged company will be among the largest integrated property developers in the region with offerings spanning across diverse sectors of mall, office, residential, hotel and leisure development.

The Exchange Offers for SMDC and HP by SM Land starts on June 4, 2013 until July 9, 2013. SM Prime’s special stockholder meeting to approve the capital hike, merger and acquisitions will be on July 10, 2013. The consolidation is expected to be completed by end of 2013.