Jaime zobel de ayala family tree

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________________________________________________________________________________________________________________ Professor Belén Villalonga, Professor Raphael Amit of the Wharton School, and Research Associate Chris Hartman prepared this case. Access to the company was partly facilitated by the Asia-Pacific Research Center. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2006 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

B E L É N V I L L A L O N G A

R A P H A E L A M I T

Ayala Corporation

On April 7, 2006, Jaime Augusto Zobel de Ayala II and his brother, Fernando Zobel de Ayala, sat together in their office in the Ayala Triangle, in the Makati district of Manila, to discuss the recent evolution of Ayala Corporation, the oldest “business house” in the Philippines, which their ancestors founded in 1834. Earlier that day, at the annual shareholder meeting, Jaime Augusto, who had been serving as Ayala’s Co-Vice Chairman and CEO since 1995, had been elected Chairman, succeeding his 71-year-old father, Jaime Zobel de Ayala. Fernando, who had been serving as Co-Vice Chairman and Executive Managing Director, had also been elected at the same meeting to his new role of President and Chief Operating Officer. Their newest appointments thus culminated the transfer of Ayala’s control to the seventh generation of the Zobel de Ayala family.

The two brothers reflected on the significant transformation of Ayala since Jaime Augusto had joined the company in 1981. Over those 25 years, Ayala had evolved from a real estate company into what was now one of the largest, most respected, and most widely diversified business groups in South East Asia. Relative to other family-controlled conglomerates in the region, Ayala stood out as a professionally managed, publicly traded group with a significant number of non-family shareholders. Between the holding company and its subsidiaries, the Ayala group’s businesses accounted for almost a quarter of the market capitalization of the Philippine Stock Exchange. The brothers attributed much of Ayala’s growth to this reliance on public capital markets, diversification of their businesses and professional management.

Ayala’s History

Ayala’s origins date back to 1834, when two Spanish men⎯the landowner Domingo Roxas and his employee Antonio de Ayala⎯founded a partnership called Casa Roxas to run Destilería y Licorería de Ayala y Cía., a distillery located on the Pasig River in Manila. Within a decade, de Ayala married his partner’s daughter, uniting the founding families. Exhibit 1 shows the Ayala family tree. Exhibit 2 summarizes the major milestones in Ayala’s history.

To supply raw materials for the rapidly growing distillery business, the family acquired a substantial amount of land in the outskirts of Manila. Many decades later, these landholdings would become the foundation of the real estate development business that became the core business of Ayala y Cía.⎯as the family partnership came to be known⎯as it was passed down through the Ayala family during the next 100 years.

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In 1948, under the leadership of Alfonso Zobel de Ayala and his brother-in-law, Colonel Joseph McMicking, Ayala y Cía. began building a new commercial and residential district on family-owned farm land in Makati, on the outskirts of Manila. The development was the first of its kind in the country and would eventually become the financial capital of the Philippines.

In 1967 Alfonso Zobel de Ayala died, and in 1968 Joseph McMicking retired. In the same year, Ayala y Cía. converted from a partnership to a corporation, named Ayala Corporation. It was owned entirely by the Zobel de Ayala family through a holding company called Mermac, named for the family matriarch Mercedes McMicking. The McMickings’ eldest nephew, Enrique Zobel, was appointed CEO of the new corporation, and his younger cousin Jaime Zobel de Ayala became senior vice president and second-in-command, while serving as the Philippine ambassador to the United Kingdom.

In 1974, Ayala opened itself to outside investors for the first time by selling 20% of its stock to Japanese conglomerate Mitsubishi Corp. and three of its affiliated companies. Two years later, Ayala Corp. listed its shares on the Makati and Manila stock exchanges, while Mermac maintained a controlling interest of 59.4%.

In 1983, Harvard-educated Jaime Zobel de Ayala (“Don Jaime”) became Ayala’s new CEO, replacing his cousin Enrique. Under Don Jaime’s leadership, Ayala Corp. began transforming itself into a “pure” holding company, consolidating its many real estate businesses into a separate company called Ayala Land, Inc. Through an equity carve-out, shares in Ayala Land began trading on the Makati and Manila stock exchanges in 1991, with Ayala Corp. retaining a 94% majority stake. In addition, Ayala Corp. owned controlling stakes in two publicly traded companies, the Bank of the Philippine Islands and Globe Telecom, a mobile phone company, as well as in other private companies like Integrated Microelectronics, an electronics manufacturer.

In 1995, Don Jaime stepped down as CEO of Ayala Corp., while continuing to serve as Chairman, and turned over the reins to his two sons, Jaime Augusto and Fernando. Jaime Augusto (Harvard 1981, Harvard Business School MBA 1987), became CEO of Ayala Corp. and Vice-Chairman, while Fernando (Harvard 1982) was also appointed Vice-Chairman and took over the management of some of Ayala Corp.’s business units.

Jaime Augusto, 36 years old at the time he became CEO, brought to Ayala new entrepreneurial energy, coupled with the vision of a decentralized and professionally managed conglomerate. This vision was put into practice by diversifying and restructuring the company using innovative financial strategies.

Ayala’s Corporate Diversification

Under Jaime Augusto and Fernando’s leadership, Ayala was transformed from what was essentially a real estate company with a portfolio of investments into a true conglomerate. As real estate declined in relative importance⎯the contribution of Ayala Land to the corporation’s total earnings dropped from 56% in 1996 to 31% in 2005⎯Ayala made large new investments in financial services, telecommunications, and water.

Many of these investments found their rationale in the need to develop a national infrastructure to enhance the value of Ayala’s real estate businesses and continue with the Zobel family’s longstanding tradition of contributing to the welfare of the Filipino society. As Jaime Augusto explained,

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With the Government running a budget deficit, it does not always have the ability to adequately finance all the infrastructure projects the country needs. However, as a corporation, we are comfortable working on large scale projects with a long-term development horizon. There are times when there is no proper matching between the government’s infrastructure plans and the needs of our projects. At times, this has led to our filling in the “infrastructure gap,” when appropriate. As an example, we invested in a consortium that developed a light rail project through the city of Manila as a way of decongesting the movement of traffic into Makati, the central business district which Ayala helped develop. This was partly the reason why we also invested in the privatization of the distribution of water in the city of Manila. While it provided a much needed service, helped in the government’s privatization efforts and was a value-enhancing investment for the group, it also helped create a positive climate for real estate values to strengthen.

Another key driver of Ayala’s diversification strategy was the limited size of the Philippine market. “You can only get so big,” noted Jaime Augusto. The Philippine economy persistently underperformed its Asian neighbors (see Exhibit 3 for a comparison of per-capita income), partly because of political instability and corruption, but more uniquely due to the fact that, since the 1980s, millions of skilled and semi-skilled Filipinos had emigrated to other countries to work and send money back home. This phenomenon, which began during the Marcos regime as a way for the country to get access to hard currency, hampered the growth of the vibrant middle class that was the backbone of Ayala’s market. As a result, Jaime Augusto had to figure out how to sell products and services to the vast so-called “sachet market”⎯people who can only afford to buy shampoo in little packets rather than in bottles. For instance, Globe Telecom began offering prepaid phone cards in denominations as small as 5 Philippine pesos (PHP), or about 10 cents, and in 2004 Ayala Land Inc. opened Market! Market!, a tin-roofed shopping center near Manila that catered to the sachet market.1

The Philippine socio-economic environment raised additional constraints to the growth of a company like Ayala in any one market. “You almost don’t want to be too large, it has negatives in a country like ours,” commented Jaime Augusto. He added,

An emerging country like the Philippines has a different social and economic dynamic to a developed one. Significant increases in size and market share are accepted ways of enhancing value for an institution in developed economies, subject to any limitations of law. In a country like the Philippines, the creation of value may at times have limits which are unwritten and defined more by the parameters of the tensions created by large economic inequalities, even if the law has allowed it. It therefore leads to successful business enterprises channeling their earnings and reinvesting them in new opportunities rather than just focusing on scale to build efficiencies. This results in the diversified business entities you see in emerging markets like ours.

In 2002, the company assembled all of its unlisted businesses under the umbrella of a new division called AC Capital. Three years later, it floated one of those businesses, the Manila Water Company, on the Philippine Stock Exchange.2 This brought the total number of publicly traded companies under the Ayala banner to four: Ayala Land, the Bank of the Philippine Islands, Globe Telecom, and Manila Water. Exhibit 4 shows the ownership structure of Ayala Corp. and its subsidiaries in 2005. Exhibits 5a through 5d show Ayala Corp.’s financial statements from 1996 to 2005, along with

1 James Hookway, “Beyond the Middle Class; Seeking a Broader Market, Philippine Group Goes Downscale,” Wall Street Journal, December 15, 2004, p. A18, via ProQuest, ABI/Inform, www.proquest.com, accessed March 2006.

2 In 1992, the Manila Stock Exchange (founded in 1927) and the Makati Stock Exchange (founded in 1963) merged to form the Philippine Stock Exchange.

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This document is authorized for use only by Krish Maria in Strategic Analysis - UG Spring 2016 taught by Belen Villalonga, New York University from January 2016 to July 2016.

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exchange rates and inflation data. Exhibit 6 shows assets, revenues, and net income broken down by business segment.

Ayala Land

After its spin-off from Ayala Corp. and subsequent public listing in 1991, Ayala Land continued to focus on planning and developing residential and commercial real estate via a long list of operating subsidiaries, each of which targeted a particular segment of the real estate market. The company also had interests in hotels and movie theaters. Rental operations and land and housing sales contributed the bulk of revenues to the company. At the end of 2005, Ayala Corp. owned 62% of Ayala Land, with the remaining 38% held by the public.

Revenues rose from PHP 12.7 billion in 1996 to PHP 22.1 billion in 2005. Net income over the same period declined from PHP 4.0 billion, to PHP 3.6 billion. Exhibit 7 shows Ayala Land’s financial statements.

Bank of the Philippine Islands

The Bank of the Philippine Islands (BPI) was founded by royal decree in 1851 as Banco Español- Filipino de Isabel II. It was the first private commercial bank in all of Southeast Asia. Antonio de Ayala served as director, representing the business community. BPI was instrumental in the Philippines’ national development, financing mass transit and telephone and electric utilities as well as the nation’s first steamship service.

In 1969, Ayala Corp. became the single largest shareholder in BPI. In 1971, BPI went public in the Philippine Stock Exchange and Ayala Corp. attained control of the bank. In 1974, BPI merged with People’s Bank and Trust Co. During the 1980s, BPI transformed itself from a purely commercial bank into a full-service bank by making various acquisitions in investment and retail banking. The bank earned a reputation as the national leader in the use of technology, by pioneering the introduction of automated teller machines, point-of-sale debit systems, kiosk banking, telephone banking, internet banking and mobile phone banking. Millions of Filipino nationals working around the world depended on BPI’s electronic remittance system to send money back to their families in the Philippines. In 2000, BPI acquired three insurance companies that had been directly owned by Ayala Corp., placing all of the conglomerate’s finance and insurance businesses under one roof.

In the same year, BPI acquired the Far East Bank and Trust Company (FEB), thereby becoming the largest bank operating in the Philippines in terms of asset management and trusts, and the second- largest in terms of assets, deposits, loans, and capital. Ayala’s Corporate Strategy Managing Director, Rufino Luis Manotok (HBS Advanced Management Program (AMP) 1994) described the critical role played by Ayala and the Zobel family in this transaction:

The third-largest bank in the country was up for sale. The largest bank, Metrobank, was also trying to make a play for FEB. BPI had to move quickly; with opportunities like this, the windows quickly close. Had BPI not been part of Ayala, it would not have happened. Two hundred million dollars were needed from Ayala Corp. to complete the transaction. This was a big personal bet for Jaime Augusto as well, amounting to 58% of $200 million (since 58% of Ayala is owned by the Zobel de Ayala family through Mermac). Jaime Augusto had to look many years ahead in deciding to do the FEB deal.

In 2005, Ayala Corp. owned 23% of BPI directly, and 13% indirectly through a 60% interest in Ayala DBS Holdings. Manotok explained the rationale for this ownership structure:

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Ayala DBS Holdings was created five years ago. Foreign investors kept complaining that they could not buy in, because there is a cap on foreign ownership of Philippine corporations. Since Ayala DBS was 60% owned by Ayala, it was thus classified as a Philippine corporation and created more leeway for foreign portfolio managers and foreign institutional investors to purchase BPI shares, thus creating more demand and liquidity for the stock.

Net interest income rose from PHP 8.4 billion in 1996 to PHP 18.9 billion in 2005. Exhibit 8 shows BPI’s financial statements and Ayala Corp.’s percentage ownership in BPI over that period.

Globe Telecom

In 1934, the Robert Dollar Company, a U.S. firm, set up a business in the Philippines called Globe Wireless Ltd. to operate a wireless long-distance message service. In 1974 Ayala Corporation acquired a minority interest in the firm, which by then had been re-named Globe-McKay Cable and Radio Corporation (GMCR). GMCR went public in 1975 and became the leader in data communications services in the Philippines. By the early 1990s, Ayala Corp. owned 39% of Globe, with 38% owned by International Telephone and Telegraph (ITT) and the remaining 23% by the public.

Although he was not yet CEO of Ayala Corp., in 1992 Jaime Augusto argued forcefully that Ayala Corp. should transform GMCR into a mobile phone company. GMCR changed its name to Globe Telecom and applied for a cellular network license. In 1993 Jaime Augusto helped broker a deal where Singapore Telecommunications (SingTel) bought out ITT’s equity position in Globe and the company began rolling out its mobile phone service. However, the business proved more complex and difficult than expected. By 1996, Globe was losing PHP 750 million a year and found itself the victim of thousands of fraudulent accounts. Jaime Augusto brought in a new management team and convinced its partner SingTel to stick with Globe and sink more capital into the business in a last- ditch effort to keep it going.3

The strategy paid off. Globe swung to profitability in 1998 and entered 2005 as the second-largest telecommunications firm in the Philippines, and as the largest revenue and profit contributor to Ayala Corp. among all of the holding company’s businesses. Globe’s revenues rose from PHP 1.9 billion in 1996 to PHP 59.8 billion in 2005. Over the same period, a net loss of PHP 751 million was turned around into PHP 10.3 billion of net income. Exhibit 9 shows Globe Telecom’s financial statements and the fraction of its common stock owned by Ayala Corp. from 1996 through 2005.

Manila Water Company

In 1995 the Philippine government enacted the National Water Crisis Act to privatize Manila’s public water and sewer utility, the Metropolitan Waterworks and Sewerage System. The service area for Manila was split into a West Zone and an East Zone, and private sector companies were invited to bid on the contract to operate the water and sewer utility for each sector. In 1997, the Manila Water Co., a consortium composed of Ayala Corp., as 60-percent owner, along with the British firm United Utilities and the American firm Bechtel, won the rights to begin operating the water and sewer utility in the East Zone under a 25-year concession agreement. Commercial operations began in 2000.

3 See Tarun Khanna, Krishna Palepu, and Ingrid Vargas, “Globe Telecom,” HBS No. 704-505 (Boston: Harvard Business School Publishing, 2004).

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Manila Water succeeded in reducing water losses, known as non-revenue water⎯water that people use without paying for, or water that seeps out of leaky pipes⎯while expanding service throughout the East Zone. The company turned its first profit in 2001, and in 2005 it went public on the Philippine Stock Exchange.

Revenues rose from PHP 1.5 billion in 2000 to PHP 5.8 billion in 2005. Over the same period, net income rose from PHP 123 million to PHP 2.0 billion. Exhibit 10 shows Manila Water’s financial statements and Ayala Corp.’s ownership of its common stock from 2000 to 2005.

AC Capital

AC Capital, an internal division of Ayala Corp., was created in 2002 to house all of Ayala’s unlisted businesses. AC Capital’s Managing Director Ricardo Nicanor Jacinto (HBS MBA 1986) explained:

The simplest way to describe AC Capital is everything that is not property, banking, or telecom. Those are the three pillars of our group. They are mature, they are publicly listed. Ayala’s involvement in these areas is limited to the board level. But everything else is new business, which are managed more intensively by Ayala.

Ayala’s Treasurer Ramón Opulencia (HBS AMP 2005) concurred:

AC Capital has a distinct mandate, which is to have a more active management of the emergent businesses. AC Capital plays the role of an investment company for them, deciding whether to nurture them or to harvest value for the corporation.

In 2005, the largest and most dynamic business in AC Capital was Integrated Microelectronics International (IMI). IMI assembled intermediate electronic components including disk drives, peripheral connection components, light-emitting diode (LED) displays, and printed circuit boards. IMI’s largest customer was the Japanese firm Panasonic, and the bulk of its customer base was made up of other Japanese and U.S. electronics firms. IMI’s subsidiary EAZIX performed design and engineering functions. In 2005, IMI acquired Speedy-Tech, a Singapore-based electronics manufacturer with plants in China. IMI’s revenues grew from PHP 5.1 billion in 2003 to PHP 9.9 billion in 2005, a 94-percent increase.

In late 2005, Ayala Corp. created Michigan Power in order to explore the possibility of purchasing or operating power plants within the Philippines. Other firms in the AC Capital division included Ayala Automotive Holdings ⎯a collection of Honda and Isuzu car dealerships and an auto insurance company⎯, Ayala International Pte., Azalea Technologies, and Ayala Aviation.

Jacinto explained the investment logic behind AC Capital:

We try to do what we did with Manila Water. See an opportunity where our strengths could add value and then take it public. We try to ask ourselves, “Is this a sector where we can bring our strengths and add value? Will our partners value integrity, dependability, trust, our skills of managing people?” We wouldn’t be good in certain types of industries, for example, gaming. Even if it makes money, that’s something that we wouldn’t want to get into.

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Ayala’s Financial Strategy

Key to the success of Ayala’s diversification strategy had been the Zobels’ openness to external capital markets. With 24.52% of the Philippine Stock Exchange’s total market capitalization (see Exhibit 11), Ayala Corp. and its subsidiaries boasted one of the most widely diversified shareholder bases among family-controlled companies in South East Asia—a feature that dovetailed nicely with the company’s social development mission.

Being publicly traded also facilitated Ayala’s access to global debt and equity markets, by providing enhanced liquidity to potential creditors and investors. Jaime Augusto commented on the benefits for the company of its financial strategy:

We have been keen to put emphasis on taking our operating subsidiaries public, when appropriate, because it has given us financial flexibility and a way to measure the value we create in a transparent and objective way. It has also given us a mechanism to bring in partners and create an exit mechanism for investors. In addition, our capital market tax structure gives specific advantages to listed companies. There is a 10% capital gains tax on any value created by an owner of equity that sells shares in an unlisted corporation. If you are a listed company, as a seller of shares you only pay a transaction tax, which is a half of one percent. There is therefore a significant tax advantage for those who hold shares in a listed corporation.

As Ayala sought funding for its new ventures, one unmistakable asset was the Ayala name and reputation. In 1996, Ayala was even able to issue $110 million in Eurobonds without a formal credit rating, trading solely on the company’s reputation. Jaime Augusto added,

Having built a track record and a basis for trust in our capital markets has also given us the opportunity to access capital at some of the most difficult moments in our country’s economic history and use it as a competitive advantage. It would have been more difficult to gain access to these resources as a private, family held company. During some of the most difficult moments in our country’s economic history over the last decade, when assets deflated, our currency became vulnerable and access to capital dried up, my brother and I faced a situation where we could manage the company extremely conservatively, de-leverage and ride the crisis out.... or do exactly the opposite.

We decided, in the end, to take an aggressive approach and take advantage of the cracks in the industry structures brought about by the crisis. Our unique ability, as a corporation with a solid reputation across both the debt and equity markets, to access capital fast put us in a unique advantage over other Philippine corporations in this period of economic volatility. We used our balance sheet to raise funds quickly and successfully and used it to consolidate our position in two or three industries at a time when either other investors were selling out at an unprecedented rate or did not have the capital to invest at the same rate. We were, therefore, able to reposition our holdings and market share significantly in the telecom, real estate and banking businesses through mergers and acquisitions at a fast pace and this led to significant value creation when the markets normalized.

Shareholder Value Creation

In 2000, Ayala engaged Stern Stewart & Co. to assist the corporation and its subsidiaries in moving to an Economic Value Added (EVA)-based management system. The scope of the EVA program involved (a) the definition of the customized measures of EVA for each of the subsidiaries,

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(b) identification of the EVA drivers for each of the strategic business units of the subsidiaries, and (c) integration of EVA into the investment analysis and goal setting processes.

Since 2002, the first year the program was implemented, the subsidiaries’ budgets included EVA targets, and subsequent investments and plans were required to be evaluated within the EVA context. Before the start of the annual budget exercise, Ayala Corp. advised the subsidiaries of its return expectations by providing the Weighted Average Costs of Capital (WACCs) specific to each business, which the subsidiaries incorporated in their financial targets and investment decisions. Ayala Corp. monitored the subsidiaries’ EVAs on a monthly and yearly basis to ensure sustainable improvements in EVAs, as a measure of the value created by management for Ayala’s stockholders. Indeed, the EVAs of most subsidiaries improved with the heightened consciousness for more efficient capital utilization.

Ayala’s stock price appreciation over the past 25 years also reflected the value that the Zobels were able to create for their family and other shareholders. Exhibit 12 shows the evolution of the stock prices of the corporation, it subsidiaries, and regional stock market indices since 1981.

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Exhibit 2 Milestones in Ayala Corp.’s History

Year Events

1834 Distilería y Licorería de Ayala y Compañía (Cía.) is founded by Antonio de Ayala and Domingo Roxas, the principals of the Casa Roxas partnership.

1851 Banco Español-Filipino de Isabel II, now known as Bank of the Philippine Islands, is founded by Royal Decree of Queen Isabel II of Spain to become the first private commercial bank in the Philippines and Southeast Asia. Antonio de Ayala becomes a director and one of two auditors of the bank.

1876 Antonio de Ayala dies. Casa Ayala, the family partnership, is reorganized as Ayala y Cía. and placed in the hands of two sons-in-law, Jacobo Zobel Zangróniz and Pedro Pablo Roxas.

1924 Ayala y Cía. sells the distillery business. The company focuses on real estate, insurance, and banking.

1931 In 1931, an American, Col. Joseph McMicking, comes into the family when he marries Mercedes Zobel de Ayala. McMicking and his brother-in-law Alfonso Zobel de Ayala run the company together for several decades.

1948 Ayala y Cía. begins to develop its property in Makati, on the outskirts of Manila. The development would ultimately include commercial, retail, and residential neighborhoods and become the business and financial hub of the Philippines.

1960 Mermac, the family holding company, is formed. The name comes from Mercedes McMicking. Mermac's incorporators/stockholders were Alfonso Zobel de Ayala, Mercedes McMicking, Enrique Zobel, Jaime Zobel de Ayala and Antonio F. Gonzalez.

1968 Ayala y Cía. converts from a partnership to Ayala Corporation. Mercedes McMicking appoints Enrique Zobel to run the company. Another nephew, Jaime Zobel de Ayala, seven years younger than Enrique, is appointed senior vice president and second-in-command.

1969 Ayala Corp. becomes the dominant shareholder of the Bank of the Philippine Islands.

1974 Mitsubishi Corp. and its affiliated companies buy a 20% interest in Ayala Corp.

Ayala Corporation buys 15% of Globe-Mackay Cable and Radio Corporation, precursor to Globe Telecom.

1976 Ayala Corporation sells shares to the public and is listed on the Makati and Manila stock exchanges. Mitsubishi Corporation retains its 20% ownership, and the Ayala family still owns a majority of shares through its investment company, Mermac.

1983 Jaime Zobel de Ayala is appointed CEO of Ayala Corp., replacing Enrique Zobel.

1988 Ayala Corp. consolidates its real estate businesses into a new subsidiary, Ayala Land, Inc.

1991 Ayala Land Inc. issues Class B shares to the public and is listed on the Makati and Manila stock exchanges.

1995 Jaime Zobel de Ayala steps down as CEO of Ayala Corp., due to the “Rule of 80:” the sum of an executive’s age and years of service. He remains Chairman and turns over the reins to his two sons, Jaime Augusto and Fernando. Jaime Augusto becomes CEO of Ayala Corp. and Vice-Chairman. Fernando is also appointed Vice Chairman and takes over some of Ayala Corp’s business units.

1997 Ayala Corp., Bechtel Corp., and United Utilties form Manila Water Company, a consortium to operate the water utility for the eastern half of Manila. Initially, Ayala’s ownership stake is 60%.

2000 Bank of the Philippine Islands merges with the Far East Bank and Trust and acquires Ayala Corporation’s insurance businesses.

2001 Ayala Corp sells 90%-owned Purefoods to San Miguel.

2005 March: Manila Water Company IPO. Ayala Corp. holdings of Common Stock drop to about 30%; however, Ayala controls 50% of Preferred Stock through Philwater Holdings.

May: 50:1 Reverse Stock Split on Ayala Corporation shares.

December: Family matriarch Mercedes McMicking dies at age 98.

Source: Eduardo Lachica, Ayala: The Philippines’ Oldest Business House, (Makati, Philippines: Filipinas Foundation, 1984), and company documents.

For the exclusive use of K. Maria, 2016.

This document is authorized for use only by Krish Maria in Strategic Analysis - UG Spring 2016 taught by Belen Villalonga, New York University from January 2016 to July 2016.

Ayala Corporation 207-041

11

Exhibit 3 Gross National Income (GNI) per Capita in main East Asian Economies, 2004

Economy GNI, Purchasing Power Parity

Japan $30,400

Korea $20,400

Thailand $8,020

China $5,530

Malaysia $9,630

Philippines $4,890

Indonesia $3,460

Source: World Bank, World Development Indicators, July 15, 2005, available online at http://web.worldbank.org, accessed March 2006.

For the exclusive use of K. Maria, 2016.

This document is authorized for use only by Krish Maria in Strategic Analysis - UG Spring 2016 taught by Belen Villalonga, New York University from January 2016 to July 2016.

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