Month: March 2002

FinanceAsia, a regional magazine on Asian financial markets, recently named Ayala Corporation as the Best Company in the Philippines in the Asia’s Best Companies 2002 survey. Ayala Corporation won the top spot in two categories: Overall Best Company and Company Most Committed to Corporate Governance.

The survey, which will be disclosed in full in the April issue of FinanceAsia magazine, was conducted among institutional investors and equity analysts from around the globe. It covers the performance of the top companies in 10 countries in Asia. In the Philippines, Ayala Corporation led as Overall Best Company, earning 50 out of 331 votes, or 15 percent of all votes. It was followed by San Miguel Corporation, which received 36 votes, and SM Prime Holdings, with 34 votes. Other companies in the Overall Best Company category were Jollibee Foods Corporation, Globe Telecom, Bank of the Philippine Islands (BPI), Philippine Long Distance Telephone Co. (PLDT), and Ayala Land.

Ayala Group companies figured prominently in all categories. Ayala Corp. ranked first in the category Company most committed to Corporate Governance with 61 votes, followed by PLDT with 25 votes. In the same category, BPI, Globe, and Ayala Land placed third, sixth, and eighth respectively. Ayala Corp., Globe, and BPI also ranked high in Best in Investor Relations.

Ayala Corp. was ranked second best in Best Financial Management, bested by San Miguel by only one vote. Other firms which rated highly were Globe, SM Prime, PLDT, BPI, Jollibee and Ayala Land, which tied with JG Summit in eighth place. Globe Telecom’s Delfin Gonzales was named Best Chief Financial Officer. Globe Telecom’s commitment to enhancing shareholder value was also recognized as third best among the country’s top companies. It was followed closely by Jollibee, Ayala Corp. and BPI.

Ayala Corporation recently announced a new strategy aimed at delivering increased shareholder value over the medium-term. Jaime Augusto Zobel de Ayala, president and CEO of Ayala Corp., explained that the company needs to be much more active in the management of its portfolio and that it needs to focus on building new businesses more aggressively. The company is potentially looking at structurally attractive industries in the Philippines where it feels it can achieve a position of leadership, as well as some select overseas exposure.

Explained Zobel: “We need to be much more active in how we manage our portfolio. We will not just hold businesses on an ‘as is’ basis. In this fast changing world, we will need to be prepared to constantly change our strategic stake in each of our existing businesses – bring in new partners, build regional and even global alliances, merge businesses with others. We need to be more open minded about how businesses evolve, more focused on value creation, and more prepared to forfeit control where doing so is best for the business.”

Zobel said this new strategy entails the creation of a new division within Ayala Corporation. Internally known as AC Capital, the new division has taken over responsibility for all domestic non-listed subsidiaries and will manage these businesses as a separate portfolio. AC Capital will be charged with finding new and creative ways for Ayala Corp. to create more value from each of these businesses and will also be the vehicle which will drive its new business building efforts.

Mr. Jaime Augusto Zobel de Ayala II, President and CEO of Ayala Corporation, today announced that Ayala will pursue a new strategy aimed at delivering increased shareholder value over the medium-term. Speaking before an audience of foreign and local institutional investors, Zobel noted that the company needs to be much more active in the management of its portfolio and that it needs to focus on building new businesses more aggressively. He also mentioned that the company has in fact already begun to reorganize itself along these lines.

Ayala began its strategy review by taking a hard look at itself and its reason for existence. “We asked ourselves some very tough questions. Why have a holding company at all? Why not just let shareholders invest directly in our listed subsidiaries?,” Zobel asked. He went on to add that the traditional model for the Asian conglomerate is under threat because of the rapid globalization of the product, capital and talent markets as they face the entry of tough regional and global competitors.

Despite these trends, Zobel is excited about the future of the company and concluded that Ayala can add value above and beyond that of its subsidiaries. As part of its strategy review, Ayala realized that its brand value, reputation as a “partner of choice,” talent bank and world-class business processes provide a unique source of competitive advantage. Citing the examples of its major subsidiaries, Zobel said that the parent company had played a critical role in their respective success stories. He noted that timely interventions and the use of Ayala Corporation’s balance sheet have allowed the company to develop Globe Telecom into one of the most successful companies in the country by attracting strong strategic partners in Singapore Telecom and Deutsche Telekom and by putting a strong management team in place. This same model of value creation, where Ayala Corporation was seen as a partner of choice, has also facilitated BPI’s acquisitions of Citytrust and Far East Bank as well as many of Ayala Land’s joint ventures in property development.

Zobel noted though that several changes were deemed necessary. In articulating his company’s new strategy, Zobel summed up what needs to happen: “We need to be much more active in how we manage our portfolio. We will not just hold businesses on an “as is” basis. In this fast changing world, we will need to be prepared to constantly change our strategic stake in each of our existing businesses‚ bring in new partners, build regional and even global alliances, merge businesses with others. We need to be more open minded about how businesses evolve, more focused on value creation, and more prepared to forfeit control where doing so is best for the business. He added that Ayala will, in the long-run, not keep businesses where it is no longer the natural owner, or where its performance criteria are not met. The recent sale of Pure Foods was cited as good example of a case where the company felt it was no longer possible gain additional synergies and benefits that could accrue to its acquirer.

Zobel went on to say that Ayala Corporation must build new businesses much more aggressively. He feels that this is how the holding company creates new value and therefore justifies its continued existence. “In the future, the main reason why investors will be interested in investing in Ayala Corporation, rather than just the subsidiaries, will be this business building capability, the faith that Ayala Corporation can build the “next Globe”, if you like. “In terms of opportunities, the company is potentially looking at structurally attractive industries in the Philippines where it feels it can achieve a position of leadership, as well as some select overseas exposure.

Finally, Zobel mentioned that Ayala Corporation can only execute this strategy properly if it has the correct structure in place. A reorganization of the holding company was therefore seen as necessary, and he confided that this process has actually begun. The key feature of this reorganization has been the creation of a new division within Ayala Corporation. Internally known as AC Capital, the new division has taken over responsibility for all domestic non-listed subsidiaries and will manage these businesses as a separate portfolio. AC Capital will be charged with finding new and creative ways for the Ayala to create more value from each of these businesses and will also be the vehicle which will drive Ayala Corporation’s new business building efforts. Another product of the reorganization is that by examining outsourcing options and reorienting its work processes, the company sees itself becoming leaner over the next few months and will be able to reduce its staffing complement considerably.

In concluding his presentation Zobel said : “We are just beginning to evolve Ayala Corporation into a more sharply focused enterprise. Our core values‚ trust, respect and commitment to nation building, remain unchanged, but the way we manage our businesses will. Our aspiration is to build an enterprise that will truly transcend all traditional notions of the Asian conglomerate.”