Merging SM firms’ shares fall

MANILA, Philippines (UPDATED) – Shares of listed merging SM companies went down on Monday, June 3 as valuation worries hound the deal.

At market closing, upscale residential developer Highlands Prime closed down at –5.79% to P2.44, while mall operator SM Prime Holdings Inc. closed down at –6.46% to P18.24.

However, middle-income and affordable property firm SM Development Corp. closed up 5.82% to P8.36 per share.

The decline came after the companies announced Friday, May 31, they would merge by the end of 2013 to dislodge Ayala Land Inc. as the country’s biggest property company. Also included in the deal is SM Land Inc., which is not listed.

COL Financial Research Head April Lee-Tan attributed the dip in the SM companies’ prices to valuation issues.

She said investors are worried the value of the single company to be created by the merger may be low.

“I think this is due to the conversion of the shares of SM. The valuations are low. SM Prime’s prices are low. I guess people reacted to it,” she said.

However, she said, “we don’t view this decline as negative.”

“I guess the merger is a good thing. It will the make the company bigger. With a bigger market capitalization, there will be greater liquidity.”

“It will also improve the company’s sensitivity to the country’s economic growth,” she added. – Rappler.com