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SEC rejects LBC's planned P1.2-B share sale

MANILA, Philippines (UPDATED) – The Securities and Exchange Commission (SEC) rejected the planned P1.2-billion share sale of courier operator LBC Express Holdings Incorporated of the Araneta Group.

The SEC said in a statement that it rejected the follow-on offering of LBC Express due to the company's non-disclosure of key information in its prospectus, including the legal proceedings involving its major shareholders.

According to the SEC, LBC did not include in its registration statement the pending cases filed by the Bangko Sentral ng Pilipinas (BSP) and Philippine Deposit Insurance Corporation (PDIC) against the Aranetas.

"LBC willfully omitted the details of the pending criminal and administrative cases such as Estafa and Conducting Business in an Unsafe and Unsound Manner filed by PDIC and BSP against members of the Araneta family, among others," the SEC said.

"Based on records, the Aranetas are the control persons of LBC through LBC Development Corporation which is wholly owned by the Aranetas. The significance of the subject cases necessitates a full and fair disclosure, which LBC failed to do," it added.

PSE listing application

The SEC also said LBC Express failed to disclose the status of its listing application with the Philippine Stock Exchange (PSE).

According to the PSE, LBC's listing application covering a follow-on offering and backdoor listing shares was deemed voluntarily withdrawn effective August 15, 2016. 

Amid the pending cases against Araneta-owned firms filed by the PDIC, the PSE also raised serious concerns over LBC's compliance with the PSE Suitability Rule.

This is why the PSE decided to defer the processing of the listing application covering the investment shares, public shares, backdoor listing shares, and follow-on offering, pending the resolution of the suitability issue.

Last October, LBC filed with the SEC an application to sell 69.1 million shares with a proposed maximum offer price of P17 per share.

Of the 69.1 million shares to be sold to the public, 59.1 million would be secondary shares while 10 million would be primary shares.

Net proceeds from the offering would have been used to fund general corporate purposes and working capital, including the expansion of retail and corporate business, information technology development, and other corporate purposes.

Aranetas' legal woes

The banking unit of the LBC group was led by Carlos "Linggoy" Araneta, who was among the individuals and entities found by US courts to have siphoned off other people's money. The funds were being collected by an LBC unit from Filipinos overseas who were remitting regular contributions to an investment product in a firm where LBC is a joint venture partner.

According to the PDIC findings, funds were being moved around, leaked out, and couldn't be accounted for or were found to have been diverted toward the parent LBC firm.

PDIC investigators found that this diversion of funds "caused substantial financial damage to the bank."

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) ordered the closure of LBC Bank in 2011. An estafa case was later filed against Linggoy and board members, as well as against parent firm LBC Development Corporation.

Santiago "Santi" Araneta, a son of Linggoy, had wanted to isolate LBC Express from the troubles of the bank as it raised funds for aggressive expansion.

LBC Express has vast operations that include payments, remittance, courier products, mail, parcels, and cargo logistics. These are areas that LBC Express could potentially position itself in before e-commerce transactions in the country increase exponentially. Payments and logistics have been hampering the further growth of the e-commerce industry here.

Recently, e-commerce related deals were announced by two of the biggest Philippine conglomerates: the Sy family's SM Investments acquired logistics firm 2GO, while the Ayala group partnered with Alipay of the Ant Financial Services Group, one of the world's leading digital financial services providers. – Rappler.com