HLCM tells tendering shareholders: Wait as we iron out tax issues

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Analysis and Recommendation

Holcim Philippines Inc. (HLCM) has been suspended from trading following a drop in minimum public ownership (MPO) to 5.05% from 14.27% when Sumitomo Osaka Cement Co., one of HLCM’s majority shareholders, sold its 595 million common shares to Holderfin B.V., another majority shareholder of the company. (See also: Holcim Philippines (HLCM)’s slick move shows how delisting can be quietly done)

Apparently, things are not that easy as a BIR ruling back in 2012 (BIR RR No. 16-2021) imposes a capital gains tax (CGT) of between 5%-10% and Documentary Stamp Tax (DST) on the sale of shares instead of the lower Stock Transaction Tax of 0.60%.

Moreover, tendering shareholders will be burdened by additional documentary requirements such as Certificate Authorizing Registration (CAR) and/or Tax Clearance Certificate (TCC) as a prerequisite to tender their shares. As such, the company advises remaining shareholders to hold on to their shares as Holcim irons out the regulatory and tax issues.

Our View: HLCM’s move was not too slick after all.

HLCM made a slick move when it surprised the market with its acquisition of Sumitomo’s stake which caused its float level to drop below the MPO of 10% making voluntary delisting inevitable. Such was the case until BIR’s RR No 16-2021 which will make it more cumbersome and expensive for minority shareholders to tender the remaining 5.05% of HLCM even at the higher price of P5.33/share.

This makes us wonder, if HLCM secured the remaining 9.22% block owned by Sumitomo, why didn’t they just file for a tender offer and approve an eventual delisting similar to Metro Pacific Investments Corp. (MPI)?

After all, they were willing to offer a higher price anyway. Hindsight is certainly 20-20 and blunders like this serve as an essential reminder for those wanting to delist from the exchange.

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