By Bloomberg
The head of a family-owned empire that’s worth tens of billions of dollars said his company may be ready for an outsider at the helm.
Ayala Chairman & CEO Jaime Augusto Zobel de Ayala (Bloomberg)
Jaime Augusto Zobel de Ayala II, the chairman and chief executive officer of the Philippines’ Ayala Corp., said a CEO from outside the family is one option when the group passes power to new leaders. Part of his legacy, he said, has been paving the way to make such a move possible.
“I like to think the team we have in place could provide leadership at any point for Ayala if my brother and I were to disappear,” Zobel said in an interview in the Makati business district, which his group built. “We have all kinds of options for leadership both at the professional level and potentially the family level,” he said, referring to three family members from the next generation who are currently working at the company.
Succession is a key issue in the Philippines, where families either control or have a large stake in many of the biggest companies.
Ayala traces its roots to a small distillery founded in 1834, with the controlling family descended from Europeans who arrived during the colonial era.
It’s a powerhouse in the country. Ayala Corp. is the holding company for a group that includes Ayala Land, Inc., the largest property developer by revenue, Bank of the Philippine Islands, the oldest lender, and Globe Telecom, Inc., the biggest mobile phone company. Those four entities alone have a combined market capitalization of more than $36 billion. Zobel’s family owns 47% of Ayala Corp., which has large stakes in the others.
Zobel, who’s now 60, has been running the company for a quarter century, with his brother Fernando serving as president and chief operating officer. Asked to evaluate his years in charge, he said he’s worked to retain an entrepreneurial spirit and make the company more relevant to Philippine society, both by revamping existing businesses and entering new areas such as health care and education.
“Ayala today is very different,” the Harvard-educated Zobel said. “We began to realize that we wanted a company that was far more relevant to the social and economic needs of the vast majority of Filipinos. We became far more inclusive. Ayala Land changed from a one-product company to a five-product company.”
Before, Ayala Land catered primarily to the elite of Philippine society. Now, it has residential projects targeted to different income groups. The bank, BPI, has broadened its customer base beyond wealthy individuals and the middle class and entered areas such as microfinancing.
In health care, an area where the Philippines is underserved, Ayala plans to double its clinics and expand its drugstores over the next two years. And in education, the company is operating high schools and universities, aiming to address a gap between the education that’s being provided in the country and the technical skills needed by industries such as call centers.
If stock prices are any guide, Zobel’s time as CEO has been a success. The stock has risen almost fivefold since the end of 1994, beating a 179% gain in the Philippine Stock Exchange Index. Ayala Land and Bank of the Philippine Islands have climbed 399% and 429%, respectively, in the period.
“Zobel stepped on the pedal and spread into a lot of businesses, making Ayala arguably the most diversified Philippine conglomerate,” said Manny Cruz, a strategist at Papa Securities who’s covered the country’s equities for more than two decades. It has a “presence in many key promising industries,” he said.
But there’s another view on Zobel’s time in charge, one that compares Ayala to another giant of Philippine business, SM Investments Corp. The group founded by the now-deceased Henry Sy has shot past Ayala in the league table of the country’s largest companies. SM Investments is now the biggest listed stock, with a market value of about $23 billion. SM Prime Holdings, Inc., the shopping mall and residential development arm, is No. 2, valued at about $21 billion.
SM’s lender, BDO Unibank, Inc., has surpassed Bank of the Philippine Islands by market value. And SM Investments already has a CEO from outside the Sy family.