Why Robinsons Retail's BuyBack of P15.77-Billion of DFI Unit's Shares is Good for the Company

Listed Robinsons Retail Holdings Inc. (RRHI) on Friday, May 30, announced its repurchase of shares belonging to a unit of DFI Retail worth P15.77 billion, or 22.2 percent of the RRHI’s common shares.

In a statement, the Gokongwei Group's retail arm said it has bought back 315.31 million common shares of GCH Investments Pte., Ltd., which is seen to boost capital allocation to “create more value to its stakeholders.”

In 2018, DFI Retail became a minority shareholder of RRHI after the retail arm acquired a 100 percent stake in Rustan Supercenters through a share-to-share swap deal with DFI. The company, which used to go by Dairy Farm International, increased its stake in RRHI after it bought secondary shares from the Gokongwei family and also from the market to reach a 20 percent ownership stake.

The stock purchase was done through a special block sale in the PSE, where both companies determined a mutual deal on stock prices. RRHI said both entities had considered prevailing market conditions and “strategic considerations.” However, because RRHI is paying P50 per share, the company will end up shelling out about 36.2 percent above the current market price. Still, the move is seen as a vote of confidence from the conglomerate. 

“RRHI views this buyback transaction as a strategic move to optimize capital allocation and create more value to its stakeholders,” the company said in a disclosure with the Philippine Stock Exchange. “Moreover, the ongoing share repurchase program reflects the company's belief that current market prices do not fully reflect the underlying financial strength and long-term growth prospects of RRHI."

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“DFI has been instrumental in RRHI’s growth over the last few years,” said Stanley C. Co, RRHI president and CEO. He noted that the Gokongwei subsidiary’s acquisition of Rustan Supercenters, Inc. in 2018 and Rose Pharmacy in 2020 from DFI has allowed it enter the premium retail business and to expand its reach in the Visayas and Mindanao regions. This transaction also added The Marketplace and Shopwise to the company’s portfolio. RRHI also became the exclusive distributor of DFI private label food brands Meadows and Guardian.

The Gokongwei unit was able to carry out the repurchase through the use of internal resources and external borrowings, while ensuring financial flexibility even after buying these back.

“We remain firmly aligned with our commercial objectives and look forward to strengthening this collaboration in the years to come,” said Co. “These brands (Meadows and Guardian) continue to gain traction in the market, and are a testament to our shared commitment in providing consumers innovative and affordable options

Robinsons Retail’s total assets as of end-March amounted to about P168.9 billion with a cash balance of P9.1 billion. It also saw an uptick in its core earnings at 4.9 percent to P1.2 billion year-on-year in the first quarter due to lower interest expenses.

Esquire Philippines is published by Summit Media Inc., which is also a unit under the Gokongwei Group.