Yoma Strategic and FMI forge key partnership with Philippines’ Ayala Corporation

16 November 2019
Yoma Strategic and FMI forge key partnership with Philippines’ Ayala Corporation
Serge Pun, Executive Chairman of Yoma Strategic and FMI, left, with Jaime Augusto Zobel de Ayala, Chairman and CEO of Ayala, at the press conference in Singapore.

Yoma Strategic Holdings Ltd. and its affiliated company, First Myanmar Investment Public Co. Ltd. announced this week that one of the Philippines’ leading conglomerates, Ayala Corporation, would be investing US$237.5 million for a 20 percent stake in each of the Yoma Group companies, signifying the largest FDI made by the Philippines private sector into Myanmar.

Yoma’s father and son team stressed the importance of the two family-run conglomerates – from Myanmar and the Philippines - joining together in what is clearly a win-win situation for both sides and a partnership that they said resonates between like-minded business people.

This is clearly an important milestone for the Yoma group. 

“I am extremely pleased and honoured to have Ayala become one of our most important strategic partners. This partnership reflects Ayala’s faith in the future of Myanmar and validates the Yoma Group’s business model in the country. Ayala is recognised as one of the foremost conglomerates in the Philippines with a history of 185 years and a stellar track record of commercial success in many sectors across the economy. We look forward to leveraging on the expertise and experience of Ayala to strengthen our existing businesses as well as to explore potential opportunities in Myanmar,” said Serge Pun, Executive Chairman of Yoma Strategic and FMI. 

Speaking at the press conference in Singapore, Serge Pun explained how the two sides had hit it off, even before the possibility that they might join forces.

“The fact that the Ayala Corporation, the family, has had this for more than 180 years, and the fact that this seventh generation has led this company for more than a decade and stands tall and proud in the business community seems a lot. I am a firm believer that there is a lot of wisdom which is undeniable. So for me there is a great deal of respect for that,” he said.

The overlapping businesses is the rational part, Serge Pun noted.

“There is very sound rationale to join forces and do things together because we know already that we can learn from what they have been doing. But what I would like to emphasize is the chemistry, stressing this was important in working together.”

As one of the most well-respected conglomerates in Asia, Ayala’s development in the Philippines in recent years has been particularly impressive and is relevant for the Yoma Group’s growth near-to medium-term growth plans in Myanmar. Ayala’s diversified businesses cover many sectors that are highly relevant for the Yoma Group. Furthermore, they share a long-term view of building scalable and sustainable platforms to cater to the population of Myanmar – a core part of Yoma’s mission statement. 

Jaime Augusto Zobel de Ayala, Chairman and CEO of Ayala, told the press conference that he welcomed the opportunity to work together. He noted that the policies have begun to change in Myanmar, it has become far more welcoming for foreign capital.

“It is a tremendous opportunity that goes beyond any particular government, it is a country that will go through the kind of growth cycle we’ve seen in the Philippines, and we would like to be a part of it and contribute to it in some small way,” he said.

“Our partnership with the Yoma Group gives Ayala a unique opportunity to participate in Myanmar’s growth story. We could not imagine a better way to do this than with the Pun family, whose solid, decades-long reputation as a business house has cemented their expertise in multiple sectors,” Ayala said.

“We are confident that by leveraging our own capabilities and experiences over the last 185 years, Ayala’s partnership with the Yoma Group could certainly help improve the lives of the people in Myanmar through purposeful business,” he added. 

Melvyn Pun, CEO of Yoma Strategic, was upbeat on prospects.

"The partnership with Ayala is hugely significant as the Yoma Group plans for the future. Ayala’s leadership position and well-run operations in each of their key business lines across real estate, financial services, fintech, energy and others provide a roadmap for how the Yoma Group can develop. The new investment by Ayala and the recent disposals of our non-core investments will serve to provide the capital to propel us towards our aspirations, whilst strengthening the Group’s balance sheet,” he said.

Speaking to CNBC News, Melvyn Pun stressed the long-term partnership prospect and what could be learned by the Myanmar conglomerate from the Ayala group.
“Looking at what they have built in the Philippines is really quite impressive. They have a pristine reputation, leading businesses, and that really just gives us a playbook for how to grow,” he told CNBC in an interview.

“I see them as a great role model, the reputation that they have, the quality of business that they have, that is really something that we are after. And my father and I always talk about a legacy that we want to leave behind. It is really about building the company but building the country for our people. They are as good a role model as anyone.”

Melvyn Pun noted his company’s mission statement that seeks to help build a better Myanmar for its people. 
This was echoed by Serge Pun, speaking in the press conference, who said the Myanmar economy, though lagging when compared to ASEAN neighbours, was on a roll.

In response to a question from the media, he said he was optimistic about Myanmar’s economic growth potential.
“We have a country that is blessed with resources. We have labour, we have mineral resources, we have natural resources. It doesn’t take that much to spur the economy. What we need are two things – good infrastructure and good policy. If we have those two things, the economy will grow. So the mid-term and the long-term, I think you can’t even stop it, if you want to. You can only stop it if you have an extremely bad negative national policy. Now that happened to us in the 70s and 80s. It will never be repeated,” Serge Pun said.
There is no going back, he stressed.

“I cannot imagine the Myanmar people accepting again a closed-door, isolationist policy, as we had in the 26 years of our closed-door policy. In the same way that I can only imagine that the Chinese people today would ever accept a Cultural Revolution to come back. They have suffered, they know, and therefore we have that assurance that we will go forward. Whether we will go very fast or go slower is the only difference.

“At this moment it is quite evident that we are going slower than our neighbouring countries. Many of our neighbours have gone really like a rocket, doubling and tripling their output, whereas we have been going slower. But in a way, I hope at the end of the day it will be a marathon run and we will get to the finishing line perhaps in a better shape than other people because we have a slow, steady pace, particularly the way social reforms are done today where the rule of law, anti-corruption is at the very high position of the national agenda. That’s important and that is going to be the sustainable foundation to growth,” Serge Pun noted.

“The decision of Ayala Corporation to invest in the Yoma Group has clearly opened up vast opportunities for our two companies for which I feel extremely proud and honoured. But even more so, I am proud and excited for Myanmar and the many possibilities of empowerment and tangible benefits that this will bring to our country and its people,” he added. 

Singapore-listed Yoma Strategic and Yangon-listed FMI are clearly companies to watch.

The issue price for the shares of the two Yoma Group companies is set at S$0.45 per share for Yoma Strategic and MMK15,000 per share for FMI which represents a premium of 37.7% and 36.5% over the volume weighted average price of the shares traded on 12 November 2019 and 13 November 2019 respectively. This underscores the confidence that Ayala has placed in the future of Myanmar and of the Yoma Group.  

Ayala’s investment of US$237.5 million for a maximum 20% stake in the Yoma Group will make them the second largest shareholder in both companies. Ayala will nominate Mr. Fernando Zobel de Ayala to the board of each of Yoma Strategic and FMI. 

Yoma Strategic will issue up to 474.68 million primary shares to Ayala for a total consideration of up to US$155 million; this represents 20% of the enlarged issued and paid-up share capital of Yoma Strategic immediately following the issuance of these new shares. The transaction will be divided into two tranches: an initial 332.50 million shares representing 14.9% of the enlarged issued and paid-up share capital will be issued by end of November 2019 using the general share issuance mandate. Yoma Strategic will also seek shareholders’ approval for the remaining 142.18 million shares, representing 5.1% of the enlarged issued and paid-up share capital, at a shareholders’ meeting. The Issue Price of S$0.45 per share represents a 37.7% premium over the volume weighted average price of the shares traded on 12 November 2019.

Ayala will also provide a US$82.5 million convertible loan to FMI which would allow them to convert to up to 20% equity shareholding in FMI upon the regulatory process being completed. On 12 July 2019, the Securities and Exchange Commission of Myanmar issued Notification 1/2019 which announced that foreign individuals and foreign entities will be permitted to invest in up to 35% of the shares in Myanmar companies listed on the Yangon Stock Exchange (“YSX”).

Tun Tun, COO of FMI, pointed out an important milestone.

“This is the first major foreign investment into a YSX-listed company. FMI and Ayala are looking towards converting this convertible loan into equity within the shortest practical time period. The conversion will result in allotting 20% of the enlarged FMI shares to Ayala at a price of MMK15,000 per share. The transaction will set the benchmark for Myanmar companies with regards to new avenues to raise and receive foreign capital following the regulatory liberalisation set by the new Myanmar Companies Law 2017. It is indeed a milestone for both FMI and the development of the Myanmar capital markets in the ability to bring in foreign capital to Myanmar companies,” said Tun Tun.