SM enters logistics through stake in 2GO

Chris Schnabel
SM enters logistics through stake in 2GO
SMIC's new 34.5% stake in 2GO marks the marriage of the Philippines' largest retailer with the country's largest logistics provider

MANILA, Philippines – Sy family-led SM Investments Corporation (SMIC) is moving into the logistics industry by buying into the country’s largest integrated supply chain operator, 2GO Group Incorporated.

In a disclosure to the Philippine Stock Exchange (PSE) on March 31, SMIC said it has completed the acquisition of a minority stake in 2GO Group through a 34.5% stake in its parent company.

SM nor 2GO did not disclose how much the deal is worth.

The publicly-listed 2GO group’s businesses include shipping, freight forwarding, warehousing, and express delivery services through sub-brands 2GO Freight, 2GO Express, and 2GO Logistics.

The group also offers travel and ferry services through 2GO Travel via its own set of sub-brands: Negros Navigation, Superferry, Cebu Ferries, and Supercat.

The 2GO group was formerly part of the Aboitiz conglomerate and was known as Aboitiz Transport Corporation having grown from the original Superferry brand. Aboitiz Equity Ventures sold the unit in 2008.

As of the start of last year, 2GO and its subsidiaries had a total fleet of 23 operating vessels, of which 19 are company-owned ships. The Company also has 33% ownership of MCC Transport Philippines, Incorporated.

“We are pleased with this opportunity to invest in a fast growing, dynamic logistics business.  It will benefit from, as well as contribute to the country’s economic progress especially as development spreads to the provinces” said Harley Sy, President of SMIC.

Retail world changing

SMIC is the largest retailer in the country through its network of 60 SM Malls throughout the country including 7 in China.

The industry however is slowly witnessing the emergence of ecommerce which threatens foot traffic to these malls. One key component of ecommerce is effective logistics in order to deliver products to customer’s doorsteps. This is especially difficult in the context of the Philippine archipelago.

SMIC has taken tentative steps into ecommerce in the past through a partnership with the country’s largest online platform Lazada to sell wares from its SM store.

Lazada itself is now controlled by China-based ecommerce giant Alibaba Group, which acquired it and the rest of the Lazada platforms in Southeast Asia for $1 billion last year.

In what most analysts point to as a sign of the changing times, the online-born Alibaba is now also the world’s largest retailer, having overtaken traditional retailing giant Walmart in sales last year with revenues of $15.7 billion.

At the same time, SMIC’s local rival Ayala Corporation has made moves of its own into ecommerce by acquiring the online fashion platform Zalora with which it hopes to bring create online and offline retailing synergies.

Sy said earlier this month that  SMIC is optimistic about broader regional growth with the government plans in infrastructure, agriculture and tourism

The holding firm of the SM conglomerate saw its net income grow to P31.2 billion in 2016, on the strong performance of its property and banking units.

SMIC shares rose 0.14% to 697 as of the close of trading on March 31. Shares of 2GO group on the otherhand were down 0.08% to 9.50. —

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