Merger of SM units may dislodge Ayala Land
The SM group is studying proposals to merge mall and property development units into a 'super company' that may topple Ayala Land as Philippines' largest real estate firm

MANILA, Philippines – The business group of Henry Sy Sr, the country’s richest man, confirmed plans to merge its mall and property development units, in a move that will likely dislodge Ayala Land Inc. as the largest real estate firm in the country.

In disclosure to the stock exchange on Wednesday, February 20, holding firm SM Investments Corp (SMIC) confirmed reports quoting its chief finance officer Jose T. Sio about the planned merger of mall developer SM Prime Holdings Inc. and residential developer SM Development Corp (SMDC).

Sio, a long time officer of the Sy family’s business group, told The Philippine Star and Inquirer that the group is studying a proposal broached by investment banks to merge some units.

SMIC has several real estate-related businesses spread across mall operations (SM Prime), residential (SMDC), land (SM Land), commercial and leisure development (Highlands Prime), and gaming (Belle Corp). Except for privately held SM Land, the rest are listed in the exchange. 

The investment experts’ proposal includes folding SMDC and SM Land into SM Prime, which will then reflect a listed property unit that has a full-range real estate offerings, ranging from residential, hotel, office to shopping mall.

The “super company” that would likely come out of the proposed merger would make financial sense since it could reflect the group’s true value — one that is not captured or maximized when they are stand-alone businesses.

It’s a strategy that works well for Ayala Land and Gokongwei-led Robinsons Land. Both groups lump their mall, residential, office and hotel development businesses together, allowing them to benefit from economies of scale and a stronger asset base.

In terms of market capitalization, Ayala Land leads as the largest property development company with P437 billion as of mid-trade February 20, while Robinsons’ is at over P90 billion. SM Prime’s is P334 billion.

If SM Prime is combined with SMDC and, possibly, Belle Corp, the 3 firms’ market capitalization will reach about P470 billion, zooming past Ayala Land’s.

Various Sy family members manage the different segments of the business. –

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