The Elizaldes’ losing hotel as an MBC subsidiary

FROM being an affiliate, Elizalde Hotels and Resorts Inc. ( EHRI) is now a subsidiary of Manila Broadcasting Co. ( MBC), which used to own 36.36 percent of EHRI’s outstanding common shares.

In a PSE posting on Feb. 5, 2018, MBC said it has agreed to buy 240,000 additional EHRI common shares, equivalent to 43.636 percent of 550,000 outstanding EHRI common shares, at a par value of P1,000 apiece, for a total acquisition cost of P240 million. MBC would buy from EHRI’s unissued common shares.

In a filing, MBC said given its additional subscription to 240,000 EHRI common shares, the hotel and, instead, become an 80-percentowned subsidiary. It also disclosed the payment terms of the agreed acquisition, thus: 25 percent upon subscription and 75 percent within one year.

Translated into amounts: 25 percent equals P60 million, and 75 percent equals P180 million.

Due Diligencer’s computations resulted in MBC’s present ownership of 36.36 percent of EHRI’s outstanding capital stock. The Elizalde- owned broadcast group said, “with this transaction, 80 percent of issued shares of EHRI is now owned by Manila Broadcasting Co.” MBC’s 80-percent ownership would be equal to 440,000 shares of 550,000 issued shares of EHRI.

“this acquisition will increase MBC’s income through dividends and capital stockholders.”

EHRI’s deficit

Incidentally or not, Elizalde Hotels of Dec. 31, 2016 that its accumulated P3.637 million as of Dec. 31, 2015. It 2016 and P3.637 million in 2015.

Despite this, EHRI’s stockholders’ equity surged to P445.385 million as of Dec. 31, 2016 from the previous year’s P58.913 million. Apparently, MBC’s additional capital infusion contributed to the increase in EHRI’s total stockholders’ equity.

As of Dec. 31, 2016, EHRI had paidup capital stock of P450.05 million, up from P62.55 million as of Dec. 31, 2015.

On the other hand, MBC, had 402.683 million outstanding common shares as of Sept.30, 2017 and total liabilities of P462.74 million. Its retained earnings rose to P453.711 million from P353.261 million, statements as Dec. 31, 2016.

reported revenues of P820.513 million,

which resulted in a net income of P100.450 million. It recorded earning per share that dropped to P0.249 from P0.282 in the comparable nine-month periods.

From July to September 2017, MBC registered a net income of P16.465 million on revenue of P263.153 million.

Due Diligencer’s take

As a broadcasting company, MBC appears to be optimistic on its P440 million investment in Elizalde Hotels, including its previous ownership of 199,980 EHRI shares, or 36.36 percent.

In the case of its additional acquisition of 240,000 EHRI shares that would make MBC the hotel’s parent company, public investors may fear MBC could be the big loser. If its public stockholders actually own 41.175 million MBC shares, or 10.23 percent, the additional investments could drag down MBC’s

Isn’t a subsidiary’s loss deducted from a company’s revenue, a reduction that could 30, 2017, the broadcast entity had piled up retained earnings of P453.711 million, which, with EHRI as a unit, could reduce the amount by as much as what a subsidiary lost.

Another question that may be asked is how a by a subsidiary’s loss. The drop would mean lower dividends in the future for MBC’s public stockholders

Of course, the Elizaldes know what lies ahead for their hotel venture. Will they tell the public what’s in store for them, too? How would a hotel EHRI has been losing and turned in not retained earnings but accumulated losses? Just asking.