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IPO sets Gaisano firm’s clash with top retailers

(Source: Inquirer.net, by Doris Dumlao-Abadilla | Oct. 19, 2015)

Retailer Metro Retail Stores Group Inc. (MRSGI), which is embarking on a stock offering debut worth as much as P6.2 billion next month, seeks to double its store footprint in the next five years as part of a strategy to become one of the country’s top three retailers.

The Philippine Stock Exchange has approved MRSGI’s plan to sell to the public about 26.71 percent of its total stock.

The initial public offering (IPO) aims to sell up to 920 million in primary common shares at a maximum price of P6.10 per share. There will also be an overallotment option of up to P92 million common shares.

The stock offering of MRSGI—the biggest retailer in the Visayas and the fourth largest in the country—will be priced on Nov. 5 while the offering will run from Nov. 9 to 13. Listing date on the stock market is scheduled on Nov. 24.

Bulk of the IPO proceeds will fund the firm’s store expansion program.

In an interview with Inquirer last week, MRSGI chair and chief executive Frank Gaisano said the group would continue to open five to 10 stores each year, a pace which it started in 2010.

He said the strategy aimed to double revenues and boost sales margins.

Part of the group’s long-term aspiration is to break into the roster of the country’s top three retailers, currently occupied by the SM, Puregold and Robinsons Retail groups.

The company also wanted to put in place an online platform by next year and enter the Mindanao market by 2017 or 2018, Gaisano said.

The group is also open to fast-tracking growth through acquisitions, being no stranger to inorganic expansion. In 2011, it acquired a small six-store chain in Cebu.

Between 2008 and 2009, MRSGI started its transformation from a family-run business to a professional organization. The group hired retail veteran Arthur Emmanuel, a former WalMart executive who handled the American grocery chain’s expansion program in Latin America, particularly in Mexico, Brazil and Argentina.

“We’re spending a lot for the future,” he said. “We are investing a lot in logistics. We’re investing a lot for technology. We are working on the end-to-end enterprise software that we have. We are investing on our talents.”

He said these would entail big investments, but the “margin will improve as you add more stores. Your head office expense relative to your sales would be smaller and as you scale up, your margin will go up.”

Asked what motivated the group to go public, Gaisano said: “It’s not just in terms of funding, but it is also good for our family. Today, there are 13 of them (third-generation scions). One day it can grow to a hundred. As the family grows, governance is becoming more and more important. (If) we are publicly listed, the governance has to be really, really strong.”

 

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