By Justine Irish D. Tabile

VICTORIAS Milling Company (VMC) acquisition of Asian Alcohol Corp. is expected to lower its operating costs and improve profit margins, analysts said.

“I believe it is a huge deal [for it] will expand VMC’s ethanol and power businesses while also lowering operating costs in terms of labor and supply chain,” Timson Securities, Inc. Head of Online Trading Marc Kebinson L. Lood said in a Viber message.

“It’s more of creating better operating efficiencies within the Lucio Tan Group of companies. With the high Global inflation, it would be better for companies to create synergies to maintain or improve their margins within their spheres,” Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said in a text message.

Meanwhile, Mercantile Securities Corp. Head Trader Jeff Radley C. See said that there will be little movement in terms of price action for both companies since both are owned by Lucio Tan Group.

“Maybe Tanduay needs cash for operation and thought VMC might benefit if they sell it to them,” Mr. See said in a Viber message.

On Friday, LT Group, Inc. disclosed that Tanduay Distillers, Inc., together with Prior Holdings, Inc. and Castelbridge Investment, sold all outstanding shares of Asian Alcohol to VMC for P2.21 billion.

In the sale and purchase agreement signed on Sept. 1, Tanduay Distillers as well as the other two shareholders agreed to sell a total of 738.33 million shares of Asian Alcohol to VMC with the transaction expected to be completed before the year ends.

VMC has focused on becoming a fully integrated sugar business by diversifying into ethanol and power.

In the quarter ended May 31, revenues of VMC increased by 53.8% to P2.15 billion from P1.4 billion recorded in the previous year.

Sales in its ethanol segment are the third largest contributor at P594.71 million in the quarter, more than four times of last year’s P140.39 million.

Meanwhile, the company’s attributable net income went down to P243.6 million, lower by 26.7% than last year’s P332.2 million.

“For VMC, this will definitely be positive to further sustain their growth while Tanduay will further improve their balance sheet position to focus more on improving its growth stature with the acquisition by VMC,” Mr. Pangan said.

Mr. Lood said that the acquisition conveys that the group believes in the bright future ahead of VMC “although it is still in corporate rehabilitation.”

“The buyout will not only boost the group’s profit growth and liquid assets, but it will also aid in the manufacturing process and power generation. It will help them become more efficient with their operations in the future, which investors should consider,” Mr. Lood added.

On Friday, shares of LT Group climbed by 6 centavos or 0.69% to P8.76 apiece, while shares of VMC declined by 5 centavos or 2% to P2.45 each.