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Gokongwei’s legacy

"He disrupted industries, and became big through acquisitions."

 

At 92, John Gokongwei Jr. remains the quintessential icon of entrepreneurship and business resilience. His track record and wholesome family-oriented values are amazing. Big John is much admired and respected and feared.

He started at age 13 when the family business in Cebu was burned to the ground. 

Today, after nearly 80 years of entrepreneurship, Big John can count on two things as his legacy. 

One, his disruption of three industries that were controlled by what he called Goliaths—airline, cellular telephony, and ready-to-drink tea.  

Two, he became big largely through acquisitions and not through internal growth of companies he founded.

In 2011, he bought into PLDT for P69.2 billion, once the Philippines’ telco monopoly but which is now losing traction and focus. This was after selling his Digitel (Sun Cellular) to PLDT for P74.1 billion.

In 2013, he bought for P71.9 billion 27 percent of Meralco, Luzon’s electricity distribution monopoly.   Today, JG Summit’s expanded ownership of 29.6 percent in Meralco is worth P123 billion.   

JG Summit’s diluted ownership of 8 percent of PLDT today is worth P23.4 billion.  Larger in value than his ownership in PLDT is JG Summit’s 37 percent in UIC, the Ayala of Singapore.  That is worth P64.8 billion. 

In November 2014, John bought New Zealand’s Griffin’s Food Ltd. for P26.25 billion. 

“In recent years, URC has been looking for opportunities to explore potential acquisitions and partnerships in line with our vision to be a significant regional player in snack foods and beverages. While we have already built very strong brands, our strategy is to continue offering our existing consumers and markets in the Asean and Greater China regions with innovative, convenient, lifestyle-focused and on-the-go products,” JG Summit President Lance Gokongwei said.

In 2016, JG Summit acquired 30 percent of Global Business Power for P11.8 billion.   GBP is a major power producer for the Visayas and Mindoro with generating capacity of 854 megawatts.

John’s Cebu Pacific, now 22 years old, became No. 1 in being a low-cost carrier.  His C2 became No. 1 in RTD tea. 

His Digitel Sun Cellular became a major player in cellular phones by offering cut-throat rates but when the competition became too tough, he sold out to the biggest telco, PLDT,  at a huge profit, while retaining significant presence to cash in on future growth of PLDT.

His C2 became No. 1 and still is.  Later, gin, brandy and wine proved to be also strong growth sectors.

Some acquisitions did not pan out, like his purchase of Oriental Petroleum, for P1 billion.

As it turns out, however, there were other bigger and better businesses to buy conquer or buy which are yielding more phenomenal returns and providing strong foundation for growth.  

John sold prematurely his stake in PCIBank to Equitable which later became the largest bank, as BDO, under Henry Sy Sr., a long-time business rival.   As a result, John missed the awesome double-digit growth in bank profits and returns on equity that the ten largest banks continue to enjoy  today despite tightening competition.

Banking remains a robust business and has a spectacular potential.  In the 1970s, the Philippine National Bank was the largest in Southeast Asia.  Today, the entire Philippine banking system is not even enough to match the resources of the biggest bank of either Singapore or Thailand.

John is going back into banking with his increasingly aggressive Robinsons Bank.

John was also late into power generation, a business that San Miguel easily dominated very early with generation capacity of 4,293 MW.  It is not too late to enter the game as power demand now grows 5 percent per year with the explosive growth of the economy.

JG is only now preparing to enter infrastructure, a business where San Miguel has become No. 1 and is ahead of latecomers, literally by hundreds of kms. JG is looking at the P108-billion rehab of NAIA.  It lost out in the bid for Clark.

Robinsons Land mulls entry into warehousing and logistics, dorm and shared office spaces, and digital space. 

For its part, Cebu Pacific will become conservative and flexible in its fleet expansion following a massive refleeting.  Cebu is making 4.2x more money from ancillary revenue (like baggage fees and penalties) which contributes 75 percent of revenues, than passenger sales (18 percent).  Cargo is 7 percent.

In foods, San Miguel is undisputed No. 1.  In retail, JG Summit is No. 3 in sales with $2.3 billion, behind SM Retail’s $5.7 billion and Puregold’s $2.493 billion, despite being No. 2 store count (1,718) after SM Retail (2,032) and ahead of Puregold (372).

In property, in terms of market cap, Robinsons Land is No. 4 with $2 billion, behind SMPH, $18.2 billion; Ayala Land, $10.9 billion; and Megaworld $2.7 billion.

In Forbes’ latest listing of Philippine billionaires, Gokongwei Jr. is ranked third, with estimated wealth of $4.4 billion, behind Henry Sy with $18.3 billion and up and coming Manuel Villar with $5 billion.

In the BizNewsAsia ranking, John is No. 4, with $3.63 billion, behind Sy $13.55 billion, Iñigo Zobel $4.82 billion, and Villar $4.12 billion.

Last October 2018, John was given the Lifetime Achievement Award by his Alma Mater, the University of San Carlos.  His speech was short and sweet and substantial.  

 

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Topics: Tony Lopez , John Gokongwei Jr. , entrepreneurship
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