SM Prime Holdings Inc. (SMPH), the shopping-mall development arm of SM Investments Corp. (SMIC), will acquire the China-based malls owned by the Sy family for P10.8 billion.

The acquisition, according to executive vice president Jeffrey C. Lim, will be done via a share swap in which SMPH will issue 913 million new shares to the Sy family, valued at around P11.86 per share.

“The company will engage an independent financial advisor to review the valuations 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,�? Lim told reporters in a briefing on Wednesday.

SMPH, which reported a 9.3-percent rise in net income for the third quarter to P1.41 billion, said the acquisition will allow them to gain a foothold in China’s fast-growing economy and use this as a platform for long-term growth outside of the Philippines where it is already the most dominant player.

The three malls are located in the southern and western parts of China, namely, Xiamen, Jinjiang and Chengdu.

The mall in Xiamen was the first to open in December 2001. It has a gross floor area (GFA) of 128,000 square meters, almost similar in size to SM City Sta. Mesa and is 100-percent occupied. 

SM Jinjiang opened in November 2005 with a GFA of 170,000 sqm and occupancy of 74 percent. Opened last year was SM Chengdu with a GFA of 170,000 sqm and an occupancy rate of 71 percent. “The three malls provide an existing platform for us to expand in this fast-growing market.

While SMPH is still firming up its expansion plans in China, and subject to the availability of suitable locations, it may initially build one to three malls every year and will likely position its expansion in the second- and third-tier cities,�? said Lim.

“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 middle-income sector and rising consumer spending.�? In an earlier interview, SMPH president Hans Sy said a fourth mall will be put up next year, located in a seven-hectare property in Chongqing, southwest China’s commercial capital.

“Construction will start next year while completion is expected in 2009.�?  In the Philippines, SMPH has 30 shopping malls in operation. Next year, it plans to open three more—in Pangasinan, Bulacan and Marikina City.

In a related development, SMIC on Wednesday reported a 14-percent rise in nine-month net profit to P8.5 billion from P7.5 billion. Consolidated revenues, on the other hand, grew sharply by 96 percent to P82.6 billion versus P42.2 billion a year earlier on higher retail revenues which amounted to P65.2 billion.

“We are encouraged by SM’s performance during the first nine months of 2007. While the strong peso and higher oil prices could eventually affect the spending pattern of many Filipinos, we expect sales to remain strong as we move toward the holiday season allowing us to achieve our full-year targets,�? said Harley Sy.

The strong momentum, the company said, will allow it to achieve its full-year net income target of P12 billion. Apart from mall development, SMIC holds interest in the banking sector, property development and retail.