The board of SM Prime Holdings, Inc. has approved the acquisition of three SM malls in China currently owned by the Sy Family via a share swap worth P10.8 billion. In a press briefing yesterday, SM Prime executive vice president Jeffrey Lim said the move will allow SM Prime to gain a foothold in China’s fastgrowing economy and use this as a platform for longterm growth outside of the Philippines where it is already the dominant shopping mall developer.

The SM malls in China are similar to the SM malls in the Philippines, and are located in the southern and western parts of China namely, Xiamen, Jinjiang and Chengdu.  Among the anchor tenants of the three malls are Wal-Mart and SM-Laiya Department Store, Cybermart and Wanda Cinema. Junior anchors include Watsons, McDonald’s, KFC, Giordano, Pizza Hut and a number of Chinabased outlets and stores. 

‘While SM Prime continues to expand its operations in the Philippines, its planned acquisition of the China malls will provide its shareholders the opportunity to tap and take advantage of the high growth prospects offered by China, being Asia’s growth leader,’ said SM Prime president Hans Sy. He said ‘SM Prime takes pride in being a Filipino company, but it is also the goal of SM Prime to give pride to Filipinos by becoming an active player in the Asian region as well.’

The net acquisition price of R10.8 billion was arrived at based on a 20 percent discount to the gross appraised value of the China properties less outstanding liabilities.

The acquisition will be effected through a share swap whereby SM Prime will issue 913 million new shares to the Sy Family, the issue price of which is based on SM Prime’s 30day volume weighted average price.

The Company earlier appointed Citigroup Global Markets Limited and Macquarie Securities (Asia) Pte Limited as its financial advisers for the acquisition and Savills Valuation and Professional Services Limited as independent asset appraiser. The three malls provide an existing platform for SM Prime to expand in this fast-growing market.

While SM Prime is still firming up its expansion plans in China, and subject to the availability of suitable locations, the Company may initially build 1 to 3 malls every year and will likely position its expansion in the second- and third-tier cities.

These are similar in demographics to the existing three malls and, in a way, to the Philippines. Management believes that the growth in these areas will be strong given the expansion of the middleincome sector and rising consumer spending.

SM Prime will engage an independent financial advisor to review the valuations within 2007 and expects to enter into definitive agreements in connection with the acquisition in early 2008 and, subject to regulatory approvals, to complete the acquisition within the first half of 2008.