Robinsons Retail buys 22.2% of itself in block sale

Robinsons Retail Holdings [RRHI 37.80 ?3.0%; 497% avgVol] [link] disclosed that it used a block sale to purchase 315.3 million RRHI shares (~22.2% of its outstanding shares) for P15.77 billion. The per-share price was at P50, which was a 36% premium over RRHI’s market price before the block sale completed. RRHI bought the shares from DFI Retail Group (DFI), a Hong Kong-based investor in SE Asian retailers. DFI is reported to be “streamlining” its portfolio and will use the proceeds to support its subsidiary businesses. The amount spent on this “special block sale” comes out of the capital allocated by RRHI toward share buy-back transactions; there is only ~P166 million left in buy-back allocations.

MB BOTTOM-LINE:  This feels a bit like when Converge had to catch the bags of its American investor, when that investor suddenly decided to liquidate its Converge stake. The biggest winner here is obviously DFI, which was able to get a massive premium for its shares. They would not have received anywhere close to that price if they had tried to sell the shares on the open market; considering RRHI’s average volume is only about 500k shares per day, this deal would have taken three years to complete, and the constant selling pressure would have nuked the price. The primary justification for the deal from RRHI’s perspective is that it feels like its own stock is undervalued by the market, but it’s been almost 1.5 years since the market valued RRHI at anything close to the P50/level. If I were an RRHI shareholder (I’m not), I’d be thankful to have this block of shares off the market, but I’d also not be a fan of the price we had to pay to do it.