SM Prime, the country’s largest mall developer and operators, has agreed to fold in three Sy-owned malls in China in a deal valued at P10.8 billion. Henry Sy, one of the Philippines’ richest men, owns both SM Investments and a portion of SM Prime, but his investments in China are personal.

The P10.8 billion deal represents a 20 percent discount on the gross appraised value of the China properties less liabilities. SM Prime would issue to the Sy family a total of 913 million new shares whose valuation would be based on SM Prime’s 30-day volume weighted average price.

This would effectively increase the Sy family’s stake in SM Prime by 2 percent  Jeffrey Lim, SM Prime’s chief financial officer said the expansion in China would support future growth with the conglomerate planning to open two to three malls a year in China. It plans to open a fourth mall in China next year. 

Lim said the company may issue P3-4 billion in local debt next year to finance expansion.  SM Prime on Tuesday reported an 11 percent rise in nine-month net income to P4.3 billion SM Investments said its nine-month net income rose 14 percent to 8.5 billion pesos, buoyed by a near doubling of revenues. 

Deducting first-half profit, net earnings were P2.67 billion in the third quarter, up around 11 percent from a year ago.  SM Investments capital spending next year on new malls, leisure and property projects, retail, and banking would rise nearly 30 percent to P25.9 billion. 

SM Investments’ shares were up 0.7 percent at P357.50 on Wednesday, underperforming a 2.3 percent gain on the main index. The shares fell 12 percent in the third quarter, while the broader index lost 2.4 percent.  The China SM malls are located in southern and western parts of China — Xiamen, Jinjiang and Chegdu.

The Xiamen mall has a gross floor area (GFA) of 128,000 sqm., almost similar to SM City Sta. Mesa and is 100 percent occupied. SM Jinjiang and Chengdu meanwhile have a GFA of 170,000 sqm. each. Among the anchor tenants of the three malls are Wal-Mart and SM Laiya Department Story, Cybermart and Wanda Cinema. Junior anchors were Watsons, McDonald’s, KFC, Giordano, Pizza Hut and a number of China-based outlets and stores.