Megawide Construction Corp (PSE: MWIDE) and its partner are selling off their shares in GMR-Megawide Cebu Airport Corporation (GMCAC), the developer and operator of Mactan Cebu International Airport, to Aboitiz InfraCapital for a total deal value of P25 billion.
MWIDE, which owns 60 percent of GMCAC will get a total of P15 billion, while its partner, GMR Airports International BV (GAIBV) will get the remaining P10 billion.
The structure of the deal will involve MWIDE and GAIBV selling a total of 33.3 percent of its equity in GMCAC for 9.5 billion to Aboitiz InfraCapital, a wholly owned subsidiary of Aboitiz Equity Ventures (PSE: AEV), so that each partner will own one-third a piece of GMCAC.
The balance of P15.5 billion, on the other hand, will be paid in the form of exchangeable notes, where MWIDE and GAIBV will transfer the remaining 66.7 percent of GMCAC upon its maturity on October 30, 2024.
MWIDE’s divestment of GMCAC is expected to improve its long-term corporate value, as it sharpens its strategic focus on its core business.
MWIDE’s share price has lost as much as 82 percent, from P16.72 per share in 2019 to a low of P3 per share this year due to continuing losses brought about by the recent COVID-19 pandemic.
Although MWIDE’s stock has been recovering slowly lately, its share price is still far from its ideal value created by its recent divestment.
How will the divestment of GMCAC enhance shareholder value of MWIDE? What are the earnings prospects of the company? How much should the market value the stock as MWIDE realigns its business model for growth?
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