The 2GO business case study

Quite suddenly, Sulficio Tagud, Jr. retired both from the management and the board of 2GO Group, Inc. in April, and Dennis Uy became president and chief executive officer (Rappler, 05.18.2017.). Frederic DyBuncio of SM Investments was elected ExCom chairman. Then waves of rumors and speculations of accounting overstatements of previous years’ income bore holes on the shipping company’s credibility and integrity — was it sinking? The Philippine Stock Exchange (PSE) suspended trading of 2GO shares for two days after the logistics firm submitted revised financial results for 2015, 2016 and the first quarter of 2017 (ABS-CBN News, 07.10.2017). “The Securities and Exchange Commission (SEC) is investigating the alleged discrepancy in bookkeeping of leading logistics provider 2GO Group, Inc. unearthed by the new investor group now running the company,” business news headlines flashed ( Philippine Daily Inquirer-PDI, 07.10.2017). Perhaps whispers grew bolder and embroidered upon gossip when Dennis Uy and his Udenna Corp. kept coming up in the news. In May, Uy, through his Chelsea Logistics announced that it locked in a $200-million (P10.96 billion) loan with Bank of China granted under the initial $3-billion financing package it committed during the state visit of President Duterte to China in October 2016 (Rappler, 05.18.2017). Chelsea Logistics said it plans to raise about P8 billion more via initial public offering this year. This will be the second company of the Udenna group to go public after Phoenix Petroleum Philippines, Inc.

President Rodrigo Duterte rang the bell for Phoenix Petroleum at the Philippine Stock Exchange (PSE) — the first Philippine president in recent history to attend the anniversary of the listing of a company at the PSE (Rappler, 07.11.2017). Dennis Uy donated P30 million for Duterte’s presidential campaign in 2016, according to Rappler, reportedly in appreciation of then Mayor Duterte’s saving him from a smuggling case in Davao (as revealed in an anecdote by Duterte himself at that PSE speech) (Ibid.). Duterte has appointed Uy Presidential Adviser on Sports and Uy has joined some of Duterte’s official foreign trips (Ibid.). “The Dealmaker who bet big on Duterte is building a casino-to-oil empire,” a Bloomberg news article bannered (05.26.2017).

But Dennis Uy’s reportedly unwelcome takeover of 2GO, in partnership with SM Investments makes an intriguing case study, according to one retired business management professor. The restatement of the company’s reported earnings for 2015 and 2016 is curious, according to him, because it does not immediately appear to benefit the new owners of 2GO. The recent special audit was supposed “to establish the baseline accountability of the new management.”

Interviews with insiders with knowledge of various elements of the case gave background facts and a timeline: the 2GO integrated transport solutions provider group was formerly the Aboitiz Transport Corp. ( of the Superferry brand) which was part of the Aboitiz conglomerate. Aboitiz Equity Ventures sold the unit to the Negros Navigation Company, Inc. (NENACO) in 2010 for $81 million ( Rappler, 04.10.2017). NENACO had two major funders/ investors, the Kuwaiti KGLI-NM