After banking giant Mitsubishi UFJ Financial (MUFG) came in with a P23 billion investment last August, conglomerate Mitsubishi Corp. is buying a P18.4 billion stake or about 6.5 percent of GCash from Ayala, which is GCash’s largest shareholder after Globe Telecom and Ant Financial of China.
“We believe Mitsubishi can add meaningful value to Mynt, which will allow Mynt to deliver significant value to its over 94 million registered users,” Cezar Consing, president and CEO of Ayala, said in a statement.
“It’s all about serving better the many Filipinos that depend on GCash and Fuse, and for making a wider variety of financial and other products available to as many Filipinos as possible,” he added, referring to the lending division that supports GCash.
The investment from Mitsubishi was first reported by InsiderPH.
Deal overview
Mitsubishi is taking half of Ayala’s 13 percent stake in GCash by purchasing 50 percent of tech holding company AC Ventures Holding, which has other assets in its portfolio such as Zalora Philippines (45 percent stake), data center venture Globe STT GDC (10 percent), and Gogoro Philippines (21 percent).
Ayala retains ownership of 6.5 percent of GCash via Globe Fintech Innovations, Inc. (Mynt).
“The Mitsubishi partnership is 50 years old this year. That AC Ventures will be owned 50-50 by Ayala and Mitsubishi is in the spirit of this partnership,” Consing said in a text message on Friday.
Big picture
Mitsubishi, one of Ayala’s largest shareholders and Japan’s largest trading group, is strengthening its ties with the company, reinforcing a strategic partnership that has spanned over half a century, involving projects from industrial estates, cars, and clean power.
This new deal will “help Mynt grow overseas and within its own significant Japan-based ecosystem, and in areas like cloud-based payments and new credit algorithms.”
Deal maker weighs in
This is a different kind of transaction compared to the MUFG entry into GCash, which valued the payments leader at a stunning $5 billion, making it the country’s fourth biggest financial institution after the top three banks.
“It appears Ayala wanted a partner not just for Mynt but also for its other businesses under AC Ventures,” Juan Paolo Colet, managing director at investment bank China Bank Capital Corp., told InsiderPH.
Analyst perspective
Nicky Franco, Abacus Securities’ research head, said the deal is “significantly positive” for Ayala amid plans to shift its portfolio to more profitable segments.
“The cash will be used by [AC Ventures] to pay down debt incurred when it bought an additional 8 percent stake in Mynt but it is unclear why Mitsubishi settled for an indirect stake in the fintech,” Franco said in a note to investors that was shared to InsiderPH.
“It’s more puzzling since [AC Ventures] is saddled with a number of underperforming investments including GogoroPH (21 percent owned), ZaloraPH (45 percent), and others,” he added.
“This latest transaction, therefore, shouldn’t have any effect of the share price of [Globe Telecom]. It will, however, be significantly positive for AC since it will reduce the conglomerate’s exposure to the underperforming investments mentioned above,” he said.
Opportunity to tap overseas growth
“The biggest potential of this partnership is the expansion of AC Ventures’ investment universe in that Mitsubishi can open doors and introduce opportunities for growth outside the Philippines,” Colet said.
“Mitsubishi can also contribute expertise and resources to enhancing the value of those businesses that are already part of the AC Ventures platform,” he added.
In a recent interview, GCash CEO Martha Sazon said they were looking at international markets to drive growth, with the company recently rolling out payment services in China, the world’s second-largest economy.
GCash parent firm Mynt is profitable, booking a net income of P6.3 billion during the first half of 2024. This is equivalent to 28 percent of Ayala’s net income during the same period.
What this means for a GCash IPO
GCash sees no urgency to list and raise cash due to its profitable business operations.
Still, the entry of strategic partners bodes well for future listing plans, Colet noted.
“Mitsubishi’s investment is a continuation of their close relationship with Ayala and will bolster the reputation of Mynt among potential institutional investors when they do an IPO,” Colet said.
Ayala's portfolio realignment
This transaction, which follows a series of non-core asset sales, unlocks fresh funds for Ayala as it invests in new growth engines to achieve its target of P65 billion core profit by 2026.
“It seems Ayala is again reallocating capital within the group to support other core or emerging businesses,” Colet said.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
