SBS Philippines CorporationSBS

Change in the Use of the IPO Proceeds

This is with reference to the Prospectus dated 24 July 2015 in relation to the Initial Public Offering (“IPO”) of SBS Philippines Corporation (the “Company”) and the subsequent announcements on the change in the usage of the net IPO proceeds, the last amendment of which was provided on August 14, 2017.

Specifically, on August 14, 2017, the Board of Directors approved to adjust and reallocate a total of P450 million of the unutilized IPO Proceeds for the acquisition either of a warehouse facility complex or separately for the purchase of real estate property or a company holding such realty property and the capital expenditure for the purchase or construction of a warehouse building. The amount was previously intended for the strategic acquisition of businesses (P350 million) and facility improvements (P 100 million) to enhance the Company’s servicing capabilities and provide for business building acquisitions as approved by the Board of Directors on May 20, 2016.

On December 19, 2017, in line with the broader purposes to promote the growth and long term business success of the Company for which the IPO proceeds may be used, the Board of Directors resolved to further adjust the transaction structure and amount of IPO Proceeds to be applied for the indirect acquisition of a warehouse facility complex. In particular, instead of allocating a total of P450 million of the IPO proceeds for the direct acquisition of a warehouse facility complex, the Board of Directors deemed it be to the best interests of the Company and its shareholders to invest up to P350 million of the unutilized IPO proceeds in Lence Holdings Corporation (“LHC”) as capital contribution to partially finance a contemplated acquisition by LHC of a warehouse facility property together with the land, buildings, and fixed assets.

Further, in response to changes in the business environment since the IPO, the Board of Directors also approved to reallocate a broader use of the remaining IPO proceeds of up to P100 million for investments in facility improvements, reduction of liabilities, working capital and general corporate purposes beneficial for the Company.

LHC is a newly incorporated holding company which is 65% owned by the Company, 25% by the Company’s subsidiary, SBS Holdings and Enterprises Corporation and 10% by the Sytengco family.

As the warehouse facility complex being considered covers a total lot area of around five (5) hectares together with ambient and cold storage facilities and other building improvements, of which 65% is being considered for use in the warehouse and distribution operations of the Company, the proposed arrangement will allow the lease or use of the other areas of the properties to be acquired for additional business building projects of SBS Group. This arrangement permits the Company to grow and diversify its income streams at a lower capital investment.

For additional details, please refer to the attached letter to the PSE on the subject.