Aboitiz Final(2)

7/31/2019 Aboitiz Final(2)

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I. Company Profile

A. The History of Aboitiz & Co.

To say that Aboitiz & Co. is a good example of a successful company would be anunderstatement, for its history is not just about its successes but of the feats the company hadperformed to achieve them. Their story is that of how one man started a company that grewinto the corporate leviathan, and how his family held it all together.

Aboitiz & Co. traces its beginnings to the Spaniard Paulino Aboitiz who hailed from a small towncalled Lequeitio in northern Spain. In 1870, he together with his wife Emilia Yrastoza and tenchildren migrated to the Philippines to start a small business in Ormoc, Leyte. Paulino enteredinto a partnership with an abaca dealer named Jose Meurterui, consequently naming theirbusiness Muertegui y Aboitiz. Unbeknownst to them both, this was the humble begins of anempire.

Growth in business started the two men thinkingof expansion. In 1907 they bought a small shipnamed Picket to facilitate faster transportation

of their abaca products to Manila. It was commonpractice at the time, as ships were still thepreferred way to travel. The ship later on becamethe mother vessel of the soon to be Aboitiz fleet,from which their other businesses would take off.It was during this time that Paulino started

grooming his sons to take over the business. His second eldest son, Ramon, gladly assumed theposition of partner in the firm in his father stead, managing it together with the help of hiselder brother Guillermo. Continued success rained down on the Aboitiz family in the years tofollow. So much so that in 1916, the family was able to buy out Muerteguis share for P95,000(a small fortune at the time), dissolving Muertegui y Aboitiz partnership.

In 1918, Ramon bought the steam boat Tubig from Smith, Bell and Co. and started the Aboitiz

family into passenger shipping, plying the routes between the ports of Baybay, Inopacan,

I. C

OMPANY P

ROFILE


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Hilongos, Bato and Hindang in the south of the Philippines. The business was doing great. So, in1919, Ramon sold all his shares in the company and retired to Spain with his wife and son.During this time, his brother Guillermo and Portuguese business man named Arnaldo F. Silva joined to form the corporation called Aboitiz y Compania Incorporada, which was made official

on Feb. 4, 1920. Several Aboitiz cousins as well as Aboitiz brothers Paulino and Luis bought asignificant number of shares, joining the corporation and thus making it truly a family business.

Within a year, however, dark clouds descendedover the newly incorporated firm. Due to a series of bad decisions and unfortunate circumstances, thecompany found itself deep in debt to the tune of P2million. They were at the brink of bankruptcy andthey needed help. In 1921, Ramon Aboitiz goes outof retirement and returns to the Philippines tosalvage what he could of the company. He did notwant to see what his father had built crumble tothe ground. Refusing to declare bankruptcy, henegotiated with the Philippine National Bank for a loan close to P800,000 in order torestructure and rehabilitate the firm. He also made several other loans from friends andwealthy merchants; to Smith Bell in particular, Ramon had to promise a first choice of anyabaca shipment in exchange for advancing funds to keep his operations going. This was atriumph in itself, considering that Paulinos second son had no collat eral whatsoever, asidefrom the goodwill he built up in the past. It would take a total of twenty odd some years forRamon to pay off all the loans he had made, but clearly he had saved the company. Not onlythat, the cash injection allowed the company diversify into different fields such as powergeneration and distribution, sugar production, and hardware retailing.

Of course, that was not the end of our story or the trials the Aboitiz family had to face. Duringthe Japanese invasion of the Philippines in World War II, the company tried its best to continue

its operations. Before the war had endedhowever, severe bombing by both the Japaneseand Americans saw to the destruction of their

factory in Manila, as well as their power plants inMindanao. Their Cebu operations was consideredto have been hardest hit when their shipyard onMactan Island was partly destroyed along withthe hardware store and ice plant in mainlandCebu. Again, the company was left crippled.


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Ramons strategy of diversification was th e only thing that kept Aboitiz & Co. afloat.

Unfazed by the destruction, Ramon started to build from the ashes. Ever the businessman, herealized that the immediate postwar period was a time for new opportunities that needed to beseized. Of course, luck also played a major factor for it was during that time that the US Navycontracted the companys Cebu Shipyard and Engineering Works for its exclusive use for two

years. The stability provided by the contract allowed for the other Aboitiz businesses to rebuildand rebuild they did. During this time, the Aboitiz family strengthened their competencies of the different areas they held. They expanded its profitable power generation and distributionbusiness and further delved into ventures such as, banking and finance, food, coconut oilmilling, real estate development, and industrial chemicals.

In 1930, the company ventured into power generation and distribution, and invested in a sugarplantation, a sugar mill, a shipyard and hardware store. The succeeding decades saw the

company expand its power generation and distribution business and enter other businessventures, among them, industrial gases, banking and finance, insurance brokerage, food,coconut oil milling, construction, real estate development, oleo chemicals, overseas shipping,crewing and shipbuilding.

Today, together with joint ventures and alliances with domestic and foreign partners, Aboitizfocuses on six major areas, namely: power, banking, food, land development, construction andshipbuilding. Over 60 operating companies with 27,000 team members now make up theAboitiz Group of Companies.

Figure 1. The Business Structure of Aboitiz & Co.


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Figure 2. The Corporate Structure of Aboitiz Equity Ventures


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C. Aboitiz Transport System

Aboitiz Transport System (ATSC) Corporation's (ATS) history dates back to May 26, 1949 withthe establishment of William Lines, Inc., a passenger and cargo shipping companyheadquartered in Cebu. On December 21, 1995, ATS consolidated its resources and expertise

with two other Cebu based companies, namely, Carlos A. Gothong Lines, Inc. and AboitizShipping Corporation. This marked the birth of William, Gothong & Aboitiz, Inc. (WG&A). In2002, Aboitiz Equity Ventures, Inc. (AEV) acquired the combined holdings of the Chiongbian andGothong Group. Subsequently, the company changed its registered corporate name fromWG&A to its present one, which the Securities and Exchange Commission (SEC) approved inFebruary 2004. ATS is an integrated transport solutions provider in the Philippines. Its principalbusiness units are engaged in the movement of people operating under brand names"SuperFerry", "SuperCat", and "Cebu Ferries", and the movement of cargos operating under thebrand name "2GO". The company's array of services geared towards cargo movements includes

containerization, roll-on roll-off (RoRo) services, logistics and supply chain solutions. ATS alsoprovides ship management and manpower solutions worldwide under the Aboitiz-Jebsen groupof companies. The company's extensive presence throughout the country is carried out throughits branch operations and agency networks. These are located primarily in Bacolod, Batangas,Cagayan de Oro, Calapan, Cebu, Coron, Cotabato, Davao, Dipolog, Dumaguete, General Santos,Iligan, Iloilo, Jagna, Manila, Nasipit, Ormoc, Ozamis, Puerto Princesa, Surigao, Tagbilaran, andZamboanga. ATS has eight (8) operating subsidiaries and affiliates, namely, Aboitiz One, Inc.,Aboitiz Jebsen Bulk Transport Corp., Jebsen Maritime Inc., Aboitiz Jebsen Manpower Solutions,Inc., Jebsen Management (BVI) Limited, Supercat Fast Ferry Corp., Zoom In Packages, Inc. and

MCC Transport Philippines, Inc.

Figure 3. The Corporate Structure of Aboitiz Transport System


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II. Company Profile

As the company continues to grow, it has shown exceptional capability to adapt to change inorder to ensure the sustainability of its businesses. This is highlighted by the best practices thatthe company employs. Such practices enable the company to continually improve by findingand utilizing the best ways of working so as to achieve the business objectives all the whileoptimizing the use of available resources.

The discussion below aims to provide insights as to how the implementation of best practices in

different functions ultimately results to significant benefits for the company and itsstakeholders.

A. Planning

The companys portfolio comprised of several investments in a diverse range of businesses.

However, management has chosen to realign its strategy by analyzing where the company iscurrently standing and where it should be headed. This renewed focus enabled the company tocapitalize on its core strengths thereby concentrating only on a number of businesses includingthat of power, banking, transport, food, land, construction and shipbuilding. The other

businesses were either sold or closed down such as those involved in industrial gases, cement,paper, copra, food preserving, insurance, marketing, manufacturing and recopying. Proceeds of sale were then used to re-invest in power, which now the second largest power distributioncompany in the country.

This focus strategy also enabled the company to continually innovate in its chosen businesses,as exemplified by the companys pioneering in different areas such as: the development of

renewable and environment-friendly energy resources like hydropower; the application of information technology in its banking services and the introduction of containerization in the

country. It has also allowed sufficient flexibility for modernization and adoption of managementpractices and strict standards of governance that in the end, all translated into better productsand services for the customers which provide the company not only an edge over competitorsbut more importantly, long-term value for stakeholders.

II. B EST M ANAGEMENT PRACTICES


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B. Marketing

Through the years, the Aboitiz brand name has equ alled the companys commitment to quality.Not only does it communicate the time-honored values of integrity, trust and competence thatdrive the companys commitment for sustainable growth, but more importantly, it represents

the passion for continuously finding and improving ways of ultimately creating and deliveringvalue to all stakeholders.

C. Financials

Overall, the company implements a conservative management style which is manifested in itsfinancial policies. However, the company does take calculated risks if warranted. Also, itsfinancing needs does not rely much on debt, allowing it to be reasonably shielded from theeffects of economic downturns, just as what happened during the Asian crisis.

D. Human Resources

The company employs a formal process for hiring and selection of employees, which is alsoapplied to family members interested in joining the company. Exams must be passed andrequirements for work experience must be met. They all have to start from the bottom andwork their way up through merit. This reinforced the value of fairness among all employees.Starting from the bottom not only hones an employees leadership skills and establishes his

track record, but also helps him gain the acceptability of his peers as he goes up the ranks. Thisis essential in establishing a team that is truly united by a common vision. Since the companyrecognizes that its strength lies in teamwork, the culture instilled amongst its employees is onethat neither blames nor credits the efforts of an individual, but rather considers the collectiveefforts and accountability of everyone in delivering the results.

E. Organizational Structure and Decision-making

As of the time of writing of the groups reference, there were only 17 members of the family

working for the company, seven of which belonged to the board of directors of Aboitiz andCompany. There was also the board of advisers that was formed as a way to train the youngersenior officers of the company to come up. Since there were only few family members involvedin the company, there had to be more professional managers employed. However, theorganization structure still remains very lean so as to facilitate an efficient and effectivedecision- making process, which is further enhanced by the companys value s of integrity andtrust. There was also an established separate family council whereby the entire clan includingthe in-laws can give suggestions related to running the business.


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F. External Relations

The company further enhances its capabilities by forming strong ties and alliances with bothdomestic and foreign partners. The business in shipbuilding as well as in the internationalmaritime services came to materialize through the companys joint venture with a Japanese

partner, Mr. Osamu Nakamura and the Jebsen group of Norway, respectively. Together, theseventures provide synergized strength that continually drives excellence and growth in theirrespective fields.

ATSC Board Of Directors

Jon Ramon M. Aboitiz

Chairman of the Board of Directors Chairman of theCompensation/Remunerationand Nomination Committee

Roberto D. Gothong

Vice Chairman of the Board of Directors

Chairman of Risk ManagementCommittee

Enrique M. Aboitiz, Jr. President and Chief Executive

Officer Compensation/Remuneration

and Nomination CommitteeMember

Risk Management CommitteeMember

Erramon I. Aboitiz

Director of the Board

Justo A. Ortiz

Director of the Board

Audit and Corporate GovernanceCommittee Member

Sabin M. Aboitiz

Director of the Board Audit and Corporate Governance

Committee Member

Washington Z. Sycip

Independent Director Chairman of the Audit and

Corporate GovernanceCommittee

Risk Management CommitteeMember

Emily A. Abrera

Independent Director Compensation/Remuneration

and Nomination CommitteeMember

Atty. Helen G. Tiu

Corporate Secretary

Figure 4. The ATSC Board
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III. Company Profile

A. Core Values

The Core Values and Beliefs of a company are highly influenced by the principles andphilosophies of its founder or owner. The degree of influence is magnified specially in familyowned corporations because relationships are not only bounded by profession but by blood aswell. Take for example the core values of Integrity, Passion, Integrity, Competence and

Dynamism exemplified in Aboitiz Transport Corporation. These core values were very muchinherited from its founder Paulino Aboitiz and were passed on to the succeeding 4 generationsof the Aboitiz family up to Jan Ramon Aboitiz. These core values have shaped his managementstyle and as CEO, he has made sure that his subordinates observe these values as well.

Passion

Passion ignite ATS attitude and dri ve to constantly challenge industry standards to strengthentheir competitive edge. Passion to deliver and perform way above industry standards unifiesATS and it brought about the birth of 2go, Super Cat, Cebu Ferries and the Joint venture Aboitiz-

Jebsen.

Integrity

Aboitiz management uphold honesty, transparency, and fairness. They are committed todeliver constant growth, in a considered and stable manner.

Competence

The Aboitiz team is composed of highly skilled and dedicated people that provide peace of mindto their customers. The workforce is considered as Aboitiz most valuable asset and as a

commitment to them, continuous training together with employee satisfaction is of paramountimportance.

Dynamism

In line with its passion to serve and its commitment to competence, ATS is constantly looking tofind new ways of delivering value to our customers

III. C ORE V ALUES & COMPETENCIES


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Apart from the above mentioned core values, ATS is also guided by the following:

ATS Vision

Our dreams inspire a passion for better ways to delight those we serve.

ATS Mission

ATS is in the business of providing solutions for the movement of people and products. We willkeep on improving our people, systems and our network, making it easier for you to deal withus, creating more and more value for all.

These statements sets the tune in the whole corporation and clearly states the reason why topexecutives at Aboitiz work with such Passion and Commitment to excellence.

B. Core Competency

The Aboitiz name has been synonymous with transport since it purchased its first vessel, thePicket, in 1907. Today, it is the largest inter-island movers of passengers and cargo in thePhilippines.

ATS is the only total and integrated transport and logistics solutions provider in the country. Itsprincipal business units are engaged in the movement of people operating under the brandnames SuperFerry, SuperCat, and Cebu Ferries and the movement of cargos operating under

the brand name 2GO. ATS' array of services geared towards cargo movements includescontainerization, RoRo services, logistics and supply chain solutions. The company also providesship management and manpower solutions worldwide under the Aboitiz-Jebsen group of companies.

True to the vision of the founders, ATS continue to strive for excellence by setting newstandards in the local maritime industry.

Through Aboitiz-Jebsen joint venture, ATC hold the distinction of being the first shippingcompany in the Philippines to have received the prestigious International Ship Management

(ISM) Code - a certification of compliance to international standards on safety management,environmental protection, emergency preparedness, maintenance of the ship requirements,qualified and well-trained crew, and development plans for shipboard operations. The jointventure showcases the merging of the best of the East and West; providing integrated maritimeservices.


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The greatest driver of Aboitiz Jebsens continued success is human capital. The company's

multicultural team of top-flight technicians, engineers and managers is recognized for itsEFFICIENCY, RELIABILITY and ENTERPRISE. Certified by the American Bureau of Shipping forbeing ISO 9001:2008 compliant, ABOJEB puts forward quality and professionalism on bringing

ship management and crew management services to our customers. This is further confirmedby the consistent honor of receiving the Top Performer and Excellence Awards in the pastyears.

In answer to the challenge of the shippingderegulation in the 1990s, three of thebiggest shipping lines in the country,William Lines, Inc., Carlos A. Gothong Lines,Inc. and Aboitiz Shipping Lines, respond withresounding measures to offer ultimate

customer satisfaction and commitment tocontinued service, a new era of shippingwas begun through Cebu Ferries. CebuFerries planted the banner and was born with modest beginnings. It now proudly marks theislands of Visayas and Mindanao with quality service in sailing.

Responding to the 21st century thrust of going global, ATS introduced Super Ferry and SuperCat. These brands have reshaped the rules and practice of sea travel and have been pivotal andstrategic to the fast ferry industry in the country. ATS have created synergies that have

enlarged the fast ferry industry to benefit economies of scale and complement travel relatedproducts. With globalization, fast craft vessels have made it possible for enterprises andgovernments to crisscross throughout the region to conclude business deals, open new marketsand build long-term partnerships. This development propelled commerce and trade andaccelerated tourism and tourism-related activities to new and wider dimensions.

The newest addition to the ATS family is the total supply chain solutions 2GO. 2GO leverages onunsurpassed local knowledge from over a hundred years of experience and a passion toconsistently deliver cargo and information on time while offering simplified solutions to meetthe most complex requirements. 2GO combines flexibility, know-how and an integrated menu

of services as it provides solutions to customers. Capitalizing on their areas of expertise, ATCthrough 2GO have focused on four key service areas: delivery and transport, special services,tracking & customer support and supply chain solutions.


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IV. Company Profile

A. Two Acquisitions in the Past Decade

Over the past ten years, the transportation business of the Aboitiz group of companies hasexperienced two major control changes. The first was in 2002, when Aboitiz bought WG&A. Thesecond change in control came just this year, with the buyout of ATS by Negros Navigation, acompetitor.

B. The Birth of Aboitiz Transport System in 2002

William Lines Inc., Carlos A. Gothong Lines Inc., and Aboitiz Shipping Lines have dominated theshipping industry for many years until the three shipping giants merged in December 21, 1995to form the very successful WG&A.

It later became difficult for the three families to manage WG&A. For months before theconsolidation, the families had been engaged in a boardroom battle over control of WG&A. Thiscame to a head at the July 12, 2002 stockholders meeting where representatives of the

Gothong and Chiongbian clans tried but failed to remove Enrique Aboitiz Jr. as companypresident and CEO. As relationships between Gothong-Chongbian and Aboitiz had beenstrained by this event, the sale of the 61 percent Gothong-Chongbian stake in WG&A to AboitizEquity Ventures was regarded as the reasonable solution.

Aboitiz Equity Ventures purchased the shares at P3.98 each. Based on the agreement, AEV willpay half of the purchase amount in cash as of the closing date with the remaining balancepayable over five years with interest fixed at 12 percent and a one year grace period onprincipal.

Aboitiz Equity Ventures initially had 31 percent ownership in WG&A. Upon completion of thesale transaction, the Aboitiz group controled over 92 percent of the company. The deal wascompleted on September 25, 2002.

IV. R ESPONDING TO CHANGE


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Responses to Change

Despite the bitter-sweet end of the WG&A ties, the acquisition was considered a very strategicmove for Aboitiz Equity Ventures. It consolidated Aboitiz ownership and management position

in a company which is the dominant leader in the shipping industry. Very healthy returns andcash flow for the Aboitiz group was highly anticipated. With a deregulated industry, improvedport facilities in Manila for both freight and passage, a strong brand name, low leverage, strongcash flows and a leadership position in the industry, WG&A can provide AEV with the earningsgrowth to complement its other investments in power, banking and food. In 2004, theSecurities and Exchange Commission approved WG&A change of business name to AboitizTransport System Corporation.

As for the constituent companies, the consolidation was viewed as a win-win situation for the

shareholders. Victor Chiongbian, CEO of the Chiongbian group said: "We believe that we havedivested at a very reasonable price and that we would be able to re-channel our resources inthe fast-growing logistics business."

Before the acquisition, each company had the following separate assets in the company:

WILLIAM LINES INC.

Mabuhay 1 (Manila-Cebu and Manila-Iloilo)

Mabuhay 2 ((Mnl-Sur-But-Tag-Mnl and Mnl-Tag-CDO)Mabuhay 3 (Mnl-Dav-Dadiangas-Mnl and Mnl-CDO-Ilo-Mnl)Mabuhay 5 [after a few voyages permanent fielding overtaken by merger]Dona Virginia (Manila-Dumaguete-Ozamis-Iligan v.v.)Maynilad (Manila-Zamboanga-Davao)Masbate I (Manila-Masbate-Catbalogan-Tacloban)Zamboanga City (Manila-Puerto Princesa v.v.)Tacloban City (Manila-Batan-Dumaguit-Dipolog v.v.)Iligan City (Cebu-Iligan v.v.)

Misamis Occidental (Cebu-Ozamis v.v.)

CARLOS A. GOTHONG LINES INC.:

OLO Akita (Manila-CDO-Butuan v.v. and Manila-Cebu v.v.)OLO Medjugorje (Manila-Dumaguete-Ozamis-Iligan-Cebu v.v.)OLO Sacred Heart (Manila-Roxas-Palompon-Isabel-Cebu v.v.)
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OLO Lourdes (Manila-Dumaguit-Palompon-Cebu v.v.)OLO Rule (CDO-Cebu v.v. and CDO-Jagna v.v.)OLO Naju (Cebu-Ozamis v.v.)OLO Fatima (Nasipit-Cebu v.v. and Nasipit-Jagna v.v.)

OLO Mt. Carmel (Iligan-Cebu v.v. and Iligan-Dumaguete v.v.)OLO Guadalupe [reserve]Dona Cristina (Cebu-Tacloban v.v. and Cebu-Palompon v.v.)Dona Lili (Cebu-Surigao v.v. and Cebu-Maasin v.v.)Don Calvino [reserve]

ABOITIZ SHIPPING LINES

SuperFerry 1 (Manila-Iloilo-GSC-Davao v.v. and Manila-Iloilo v.v.)

SuperFerry 2 (Manila-Cebu-CDO v.v.)SuperFerry 3 (Mnl-Zamboanga-Cotabato v.v. w/ Boracay (summer) and Mnl-Dumaguit-Roxas v.v.)SuperFerry 5 (Mnl-Ceb-Ili-Dum-Mnl) and Mnl-Dum-CDO-Ceb-Mnl)Elcano (was not used; obsolete)

After the consolidation, the following changes were made:

The following ship names were changed:Mabuhay 1 became SuperFerry10Mabuhay 2 became SuperFerry 7Mabuhay 3 became SuperFerry 8Mabuhay 5 became SuperFerry 9OLO Akita became SuperFerry 6Masbate I became OLO Manaoag (in 1998)Misamis Occidental became OLO Montserrat (in 1998)

The following ships were passed to Cebu Ferries:

OLO LourdesOLO RuleOLO FatimaOLO Mt. CarmelDona CristinaDona Lili


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Don CalvinoSF 11/OLO Banneux (later)OLO GuadalupeMisamis Occidental/OLO Montserrat

Masbate 1/OLO Manaoag (later)The following ships were sold:

Tacloban CityIligan CityDona VirginiaZamboanga City

After the consolidation, ATS focused on moving towards being the only integrated transport

solutions provider in the Philippines. It engaged principally in the movement of peopleoperating under the brand names SuperFerry, SuperCat, and Cebu Ferries and the movement of cargos operating under the brand name 2GO. It also ventures into containerization, RoRoservices, logistics and supply chain solutions, and ship management and manpower solutions.

C. Divestment of Aboitiz Transport System in 2011

In 2008, Aboitiz Transport System Corp. was badly hit by the economic crisis. Net income forthe year was P402 million. The following year, total costs and expenses resulted in a net loss of

P49.4 million for the company during the first nine months of 2009.

ATS said fuel expenses account for majority of its total cost. The company noted its marginsmay improve if fuel prices continue to decline. To help mitigate the negative impact of fuelprices to margins, the company began transforming itself into value-added service organizationwith its efforts focused on integrating its services to build complete supply chain managementsolutions.

During this very difficult time for the shipping industry, Negros Navigation Company s (NENACO) parent firm KGLI-NM Holdings Inc, a company owned by Kuwaiti Gulf Link

Investments, offered to buy the Aboitiz family's transport business. In September 2008, ATS'parent company, Aboitiz Equity Ventures Inc., signed an agreement selling its entire 93.03percent stake in ATS to competitor KGLI-NM for P5 billion. The sale, which includes all of theshipping and logistics businesses of ATS except the Aboitiz Jebsen Group, is scheduled forcompletion in January 2009. However, the deal fell through after the Kuwaiti group's financeswere strained by the financial crisis.


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In 2010, NENACO again offered to buy the respective equity stake of AEV and AEV's majorshareholder Aboitiz & Company in ATS on a per share purchase price to be computed based onan ATS equity value of USD105 million (about P4.28 billion )or equivalent to approximatelyUSD0.043 per share. This time, Nenaco will finance the purchase of Aboitiz Transport with

equity investments from China-ASEAN Marine B.V., a Netherlands-incorporated companywholly owned by China-ASEAN Investment Cooperation Fund (CAF). China-Asean Investment isa private equity fund sponsored by the China Export-Import Bank.

Under the terms of the deal with Nenaco, the Kuwaiti- backed firm will buy the Aboitiz familysinterests in the transport sector, except the business interests the family co-owns with theJebsen Group of Norway. These business interests include ship management, manning andcrew management, and bulk transport held by the Aboitiz Jebsen group.

To limit the deal with Nenaco, Aboitiz Equity will buy the 62.5 percent equity of Aboitiz

Transport in Aboitiz Jebsen for P355.91 million. Aboitiz & Co. will also acquire AboitizTransports 50 percent equity in Aboitiz Jebsens chartering business for P44 million.

At a special meeting on December 1, 2010, the Board of Directors of Aboitiz Equity Venturesvoted unanimously to accept the offer of NENEACO to buy its shareholdings in its transportsubsidiary.

The deal was completed recently, on January 3, 2011. This was followed by a completed tenderoffer to buy all other remaining shares of ATS which effectively gave NENACO 98.12%ownership of ATS.

Responses to Change

The Board of Directors of Aboitiz Transport admitted that its divestment was a very difficultdecision to make, considering that the Aboitiz group has been in the transport business for over100 years. The Board of Directors, however, felt the NENACO offer was reasonable andrepresentative of ATS' value and that reinvestment of the sale proceeds in other identifiedareas will greatly enhance shareholder value over the long term. The expected P5-billionproceeds from the deal will be invested in other interests of the company including power andits banking arm Union Bank.

Management also felt confident that the increased resources of the combined company willenable Aboitiz to provide innovative services, enhanced frequency and improved customer careto its valued passengers and freight, logistics and supply chain customers. Aboitiz claims theyare happy to transfer the ownership of ATS to NENACO and its principal shareholders, the


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Chinese-ASEAN Investment Cooperation Fund, because they share the same long term vision of Aboitiz and appreciate the need for industry consolidation and collaboration to improveefficiencies and lower transport costs. The Aboitiz Group is fully committed in the transition tothe new management and they are assuring employees and management of ATS that their

interests will be taken care of.The combined NENACO-ATS entity will have 31 vessels. The business of Aboitiz Transport andNegros Navigation will still be run as separate brands. Operations, however, will be integratedto cut costs and boost profitability.

V. Company Profile

A. CEO Profile

Jon Ramon Aboitiz descends from a family of Spanish-origin in Cebu, with ancestry tracing back to the

Basque Country in northern Spain. He graduated fromUniversity of Santa Clara, California with a degree of BS Commerce, major in Management. He startedworking in the family owned corporation in 1970wherein he assumed clerical and rank & file positions.Eventually after learning the hard part of thebusiness, he takes on several manager positionsbefore he became the President of Aboitiz Shipping atthe age of 27.

The peak of his career started in 1994 when hebecame the Chief Executive Officer and President of Aboitiz Equity Ventures Inc. until January 2009. Healso served at Davao Light and Power Company(DLPC) as the President and Chairman of the Board from 1988 to 2001, President and Chief Executive Officer in 2002. He serves as the Chairman of the Board of Pilmico Foods Corporation

V. IN FOCUS : JON R AMON ABOITIZ


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and Pilmico-Mauri Foods Corporation. He has been Chairman of Aboitiz Transport SystemCorporation since January 21, 2011. He also serves as Vice Chairman of Union Bank of thePhilippines and has been its Director since June 1, 2001.

They have a ruling in the company which states that executives are required to retire from day

to day operations at the age of 60 after which they can assume a non-executive position. Afterhis retirement age, Jon Ramon Aboitiz serves as the Chairman of the Board of Aboitiz EquityVentures Inc. and Vice Chairman of Aboitiz Power Corp. in May 2009.

In addition to these positions, he also serves as trustee of the Ramon Aboitiz Foundation Inc.,the Aboitiz Group Foundation Inc. and the Association of Philippine Foundations, and is amember of the Board of Advisors, Washington Sycip Policy Forum at the Asian Institute of Management.

B. Personnel Qualities

Leaders do not command excellence, they build excellence. Excellence is being all you can bewithin the bounds of doing what is right for your organization. To be effective, the CEO must befirst a leader of good character. Personality traits and characteristics affect the ones ability to

lead and to make sound decisions for the best interest of the company. Thus, it is important toassess the traits and leadership qualities of Jon Ramon Aboitiz, the President and CEO of Aboitizand Co.

Dedicated to his craft

He spends whatever time or energy is necessary to accomplish the task at hand. He goes towork early in the morning and sees to it that everything goes smoothly as planned.

Fair in dealing with others

He deals with others consistently and justly. Before passing a judgment, he first checks all thefacts and hears everyone out. He does not jump into conclusions based on incompleteevidence.

Humble

Despite of his position in the corporation and status of the Aboitiz clan, Jon Ramon remainshumble and down-to-earth. He is not self-effacing but rather tries to elevate everyone byrecognizing their accomplishments. In their system, everyone works as a team.


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Creative

He sees things in a different perspective and thus lead followers in new directions. To widen hisoptions, he gets outside of the box that constrains solutions.

C. Being a role model

As the CEO of Aboitiz, he is a type of leader that people look up to and admire. He providesinspiration and motivation to his subordinates to seek out accomplishments. To be an effectiveleader, he exhibits the following characteristics:

Trustworthy

He possesses integrity and does the right thing even if no one is looking or even if he does not

receive acknowledgment for his act. He has consistency of purpose, operates out of discernibleprinciples, and stands for something worthwhile and d etectable.

Perseverance

He leads by example and shows the importance of dedication and hard work. If leaders couldwork hard to attain something, then others can also do it as well.

Respect for Others

How leaders treat others speaks volumes about who they are. Jon Ramon knows theimportance of his employees to the success of company, as such he treats them fairly and withdue respect. He listens to others and also considers opposing points of view.

D. Support to radical changes (organizing and resourcing for changes)

Jon Ramon Aboitiz envisions the future of the organization. He critically examines the business,its current performance and resources, and its evolving environment, in order to determine theneed for change. He continues the initiatives of his predecessors in expanding and

strengthening the company. With the current state of the economy, he believes that to be ableto develop, they need to create more employment for the people, for them to have morepurchasing power.


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E. Support to vision

One of the philosophies of the company is to be the best at what they do. They are notnecessarily no. 1 but being the biggest is not that important. Quality and Customer focus aretheir top priorities. To support the vision and philosophies of Aboitiz, Jon Ramon develops a

passion for better ways. Whatever the company do, he is always looking for a better way of doing things. He redefines their brand essence, driven by the companys initiative to lead and toset the trends in the industry.

F. Mandated empowerment

He believes that nothing can be done by one person alone, that something of lasting value isalmost always the result of a group effort. He brings out the best in each of those who follow,

seeks the development and advancement of all empl oyees, and delights in each person sgrowth in capability and character. Thus, he involves his people in decisions wherever possibleand continuously encourages them to excel in their craft.

G. Leadership

Jon Ramon Aboitiz was the fourth president of Aboitiz following the footsteps of hisgrandfather and father. He rose from the ranks from being a messenger and assistant until he

reach the top position. When it comes to his leadership style, he is more of a transactional type.In order to foster supportive relationships, he keep the lines of communication open so that hisemployees feel free to share their ideas and in return he can offer direct recognition of theirunique contributions. For him success is not because of one person but the collective efforts of many people, seen and unseen. He encourages creativity and nurtures people who thinkindependently. He believes that learning is a value and that unexpected situations are seen asopportunities to learn.


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References:

Aboitiz y Compania, the history of a Spanish business in Cebu, Central Philippines, Irene R.

Sino-Cruz, Philippine Daily Inquirer

http://www.aboitiz.com/AEV/index.php accessed on March 21, 2011

http://beta.gmanews.tv/story/131856/business/aboitiz-transport-incurs-losses-due-to-high-fuel-costs

http://www.atsc.com.ph/

http://www.portcalls.com/news-archive/2010/news20101206-a.php

http://www.ufs.ph/2009-10/node/4760
http://beta.gmanews.tv/story/131856/business/aboitiz-transport-incurs-losses-due-to-high-fuel-costshttp://beta.gmanews.tv/story/131856/business/aboitiz-transport-incurs-losses-due-to-high-fuel-costshttp://www.atsc.com.ph/http://www.portcalls.com/news-archive/2010/news20101206-a.phphttp://www.ufs.ph/2009-10/node/4760http://www.ufs.ph/2009-10/node/4760http://www.portcalls.com/news-archive/2010/news20101206-a.phphttp://www.atsc.com.ph/http://beta.gmanews.tv/story/131856/business/aboitiz-transport-incurs-losses-due-to-high-fuel-costshttp://beta.gmanews.tv/story/131856/business/aboitiz-transport-incurs-losses-due-to-high-fuel-costs

Documents

Aboitiz Final(2)