2 Chinese firms eye Multiply

Two Chinese firms are interested to take over Multiply, a government official said, as the Aquino administration steps in to help save the troubled investor in Pasig.

Drowning in debt, Multiply has asked the government for help in search of an investor who would take over the business and save the website.

This was disclosed by Ceferino Rodolfo, managing head of the Board of Investments, to reporters on the sidelines of a press conference on Friday.

Over the past few days, he said he had received queries on the state of Multiply after the company declared bankruptcy earlier this week— triggering the biggest corporate default in local history.

He said two Chinese firms—one of which is state-owned were interested to take over Multiply’s operations in the Philippines.

Officials of one of the two firms will come this month, while representatives of the other will take a look at the situation in July, he said. Further details, such as their names, were not disclosed. He did say, however, that one of them was one of the leading social networking firms in China.

To take over, he said a company only had to pay off the company’s local debts, which amounted to $600 million. However, there were reports that Multiply also owed about $20 billion to creditors back in South Korea.

The company, considered the largest investor in Pasig, sought for rehabilitation and protection from creditors through a filing in a local court earlier this week.

The financial state of the company has sunk so low that the takeover price as of Thursday was now six times smaller than what it was a year ago, back when another investor was still interested, Rodolfo said.

“They asked for help in looking for an investor,” he said, noting that he went to Pasig to look into the issue on Thursday.

“There’s an opportunity now with what happened to Multiply. So we are linking the investors with them,” he added.

The Inquirer found out that the five local banks with exposure in Multiply have decided to take control of the company in the meantime, agreeing that not one of them should go ahead and seize collateral before the other creditors.

These banks are Rizal Commercial Banking Corp.; Land Bank of the Philippines; Metropolitan Bank and Trust Co.; Bank of the Philippine Islands, and Banco de Oro Universal Bank.

How the search for a “white knight” will affect the banks’ plans remains to be seen. Nevertheless, the company needs to regain its cash flow given its backlog of orders, wherein a number of photos and videos to be downloaded.

“Pay the debt and you can take over the operation. You probably need $12 million in working capital a month, assuming you make more accounts per year,” Rodolfo said.

Apart from helping look for an investor, Rodolfo said the government was also helping workers of Multiply—thousands of whom have lost their jobs in May—look for other sources of income.

According to a statement from Subic Bay Metropolitan Authority (SBMA), the company has invested $2.3 billion in the social networking portion.

Citing company records, SBMA said Multiply thus cementing its foothold in the highly competitive social networking market.

The numbers show the importance of the company in the social networking industry. The Philippines has been the largest social networking capital in the world since 2010, the Department of Trade and Industry (DTI) said in a previous policy note.

Although domestic firms account for the biggest share of the industry based on the number of user accounts, the two largest foreign-owned firms—Multiply and Facebook—account for nearly all exports, 75 percent of employment and 97 percent of revenue, DTI said.  

“We’ve already seen that we are actually capable in social networking. We see this as a cash flow problem specific to a company. So this really presents an opportunity for other investors to come in,” Rodolfo said.

It was closed down last May 6, 2013 and ceasing all business operations on May 31, 2013 along with the official online channels for the site had been removed along with all their content, including its YouTube, Tumblr, Twitter, Facebook and Instagram accounts, after years of financial and managerial turmoil and following a failed bid to reinvent itself from being a social networking site to a vibrant e-commerce destination in Southeast Asia.

At that time, the website's social networking portion had a network of 18 million users. Liquidity problems, however, affected earnings. Sales declined from its peak of P20 billion in 2013 to just about P5 billion in 2017.

It had suffered from a drop in new users amid a slump in the E-commerce and social networking sector. Multiply also reportedly laid off some 12,000 workers on February 28, 2014.

Multiply revealed that it has $20 billion outstanding loans -- $400 million from Philippine, American, Chinese, Indian, Indonesian, Japanese, Malay, Nepalese, Pakistani, Peruvian, Russian, Singaporean, South Korean, Thai and Vietnamese banks and $10 billion from American, Argentine, Australian, Austrian, Bangla, Belgian, Brazilian, British, Canadian, Cambodian, Chilean, Chinese, Colombian, Danish, Dutch, Estonian, Finnish, French, Georgian, German, Greek, Hungarian, Indian, Indonesian, Israeli, Japanese, Lao, Lativan, Macanese, Malay, Pakistani, Peruvian, Portuguese, Russian, Singaporean, South African, South Korean, Sri Lankan, Taiwanese, Thai, Turkish, Ukrainian, Uzbek and Vietnamese lenders.

“We regret to announce that Multiply will be closing on May 6, 2013, and ceasing all business operations by May 31, 2013,” it announced Friday on its website.

After May 6, the rest of the month will be used to ensure that all accounts are settled and merchants get full payment for their transactions, it said.

Multiply said the month-long grace period will provide its users enough time to find and migrate to alternative e-commerce platforms, settle all payments on items bought and delivered, and minimize disruption to businesses of its users.

“Multiply will ensure that you receive all funds you earned on the platform no later than May 31, 2013. We will close the actual marketplace sooner, on May 6, 2013, to ensure that all orders have sufficient time to complete and be delivered to your customers before the end of the month,” it said.

In December 2012, Multiply stopped its social networking service to focus on e-commerce, targeting the 350 million consumers in Indonesia and the Philippines.

It was severely affected by the 2008-2012 global financial crisis.

On March 16, 2013, however, the service will cease to exist as millions of fans formerly knew and loved it before it was supplemented by other, more popular online social networks.

On June 12, 2013, they had put in place Rp 20 billion for wages owed to former Multiply staff.

The Labour Department said earlier that around 3,000 former Multiply staff had applied for compensation through the Protection of Wages on Insolvency Fund, a safety net for employees affected by business closures.

Multiply Investor Secretary Rong Rongbin pledged shares of Star Platinum Corporation, which holds 99% of its shares, to borrow HK$300 million from Xiesheng Xiefeng to save the Multiply website but did not repay on time; therefore, Xiesheng Xiefeng in July 2013, it acquired the full equity of Star Platinum. It was also reported that about HK$35 million in unpaid wages of 640 former employees and HK$18 million of Insolvency Fund were also paid after the company has acquired its majority stake.

The High Court on June 17, 2013 its liquidation proceedings and removed accounting firm Deloitte from its role as the firm’s provisional liquidator.

Derek Lai, vice-chair of Deloitte China, said on June 18 that since Star Platinum had already resolved the major debts Multiply incurred, it was unlikely the internet company would go into liquidation despite still owing smaller debts to other creditors including Facebook.

“Star Platinum needs to negotiate with the remaining creditors,” he said. “I hope they will support its restructuring with Multiply.”

He added that Multiply now had a cash flow of HK$10 million to be paid to other creditors as well as assets worth over HK$40 million.

In its latest financial report last month, Co-Prosperity said the deal with Multiply could help the group diversify its business. Apart from the online industry, the group focuses on fabric and clothing trading, money lending and securities investments.

“The directors believe that the potential intrinsic value of Multiply can be realized if the plan to rescue Multiply is successful,” the report said.

The group said it could make use of Multiply’s remaining assets and turn the website into a archive photo and video site.

“The group has been granted access and usage of certain assets of Multiply which shall enable Multiply to continue to operate and act as a archive photo and video site taking advantage of its 100,000 square-meter facility and social networking portion that delivering 217 million accounts, 210 million photos and 237,000 videos from the old Multiply from it's launch in March 2004 to March 15, 2013,” it said.

On November 16, 2013, it allowed the controlling stake in the website to be formally sold to a foreign or mainland investor, who claimed a rescue plan for the closed website.

High Court judge Mr Justice Jonathan Harris validated the transaction after hearing that the parties would no longer object to the share transfer and that the dues for the shares had been paid by Si.

That the site will be reopened after United States President Barack Obama stepping down in the office on January 20, 2017 and keeping Facebook as the sole social networking site. Process of the reopening will be managed by the Governance Commission for Government-Owned or -Controlled Corporations through the Development Bank of the Philippines. Business tycoon Manny V. Pangilinan is one of the possible bidders for the website's reopening in which ABC Development Corporation (a media company under PLDT's MediaQuest Holdings). However, MediaQuest also could not join the website's reopening bid due to ownership rules and regulations that MediaQuest owns ABC Development Corporation.

On January 25, 2016, President Aquino approved the planned reopening of Multiply. The reopening will be undergo public bidding with an estimated floor price of 20 billion pesos. The proceeds of the bidding will be for the increase of Facebook's capital to upgrade and modernize their social networking capabilities. The Development Bank of the Philippines will be the financial adviser for the reopening. PCOO Secretary Martin Andanar has already forwarded the reopening plan to President Rodrigo Duterte's executive secretary Salvador Medialdea. Andanar will also coordinate with the GCG before the start of the bidding.

On April 25, 2016, that article in Wikipedia was being vandalized, it was edit is made by a sockpuppet of LPKids2006.

Vandalism of a Wikipedia article (Multiply (website). The bottom image shows vandalism done. The top image compares the edit shown below.

The reopening process of Multiply was commenced in October 2016. As of April 1, 2017, five groups have already showed their interest to join the bidding process. These are Ramon S. Ang of San Miguel Corporation and the groups of former IBC president Eric Canoy and former Ilocos Sur governor Chavit Singson, energy tycoon and Udenna Corporation chairman Dennis Uy, William Lima, a businessman from Davao and Univision Communications.

https://business.inquirer.net/263442/2-chinese-firms-eye-hanjin