dl industries - domestic offering circular - nov. 26 2012_2

8/18/2019 DL Industries - Domestic Offering Circular - Nov. 26 2012_2

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This Prospectus is being displayed on the website to make the Prospectus accessible to moreinvestors. The Philippine Stock Exchange assumes no responsibility for the correctness of any ofthe statements made or opinions or reports expressed in the Prospectus. Furthermore, the

Philippine Stock Exchange makes no representation as to the completeness of the Prospectusand disclaims any liability whatsoever for any loss arising from or in reliance in whole or in part

on the contents of the Prospectus.

IMPORTANT NOTICE

You must read the following disclaimer before continuing. The following disclaimer applies to thedocument following this page and you are therefore advised to read this disclaimer carefully beforeaccessing, reading or making any other use of the attached document. In accessing the attacheddocument, you agree to be bound by the following terms and conditions, including any modificationsto them from time to time, each time you receive any information from us as a result of such access.

You acknowledge that the attached document and the information contained therein are strictlyconfidential and intended for you only. You are not authorized to and you may not forward or

deliver the attached document, electronically or otherwise, to any other person or reproduce suchdocument in any manner whatsoever, nor may you disclose the information contained in the attacheddocument to any third-party or use it for any other purpose. Any forwarding, distribution,publication or reproduction of the attached document in whole or in part or disclosure of anyinformation contained therein or any use of such information for any other purpose isunauthorized. Failure to comply with this directive may result in a violation of the securities laws ofapplicable jurisdictions.

Nothing in this electronic transmission constitutes an offer to sell or a solicitation of an offer to buyany securities in any jurisdiction where it is unlawful to do so. The securities referred to in theattached document have not been and will not be registered under the U.S. Securities Act of 1933, asamended (the “Securities Act”) or under any securities laws of any state or other jurisdiction of the

United States and may not be offered, sold, resold, transferred or delivered, directly or indirectly,within the United States except pursuant to an applicable exemption from the registrationrequirements of the Securities Act and in compliance with any applicable securities laws of any stateor other jurisdiction of the United States.

CONFIRMATION OF YOUR REPRESENTATION: IN ORDER TO BE ELIGIBLE TO VIEWTHE ATTACHED DOCUMENT, INVESTORS MUST COMPLY WITH THE FOLLOWINGPROVISIONS. YOU HAVE BEEN SENT THE ATTACHED DOCUMENT ON THE BASIS THATYOU HAVE CONFIRMED THAT YOU AND THE PERSON, IF ANY, FOR WHOSE ACCOUNTYOU ARE ACTING, ARE LOCATED OUTSIDE OF THE UNITED STATES (WITHIN THEMEANING OF REGULATION S UNDER THE SECURITIES ACT) AND CONSENT TODELIVERY BY ELECTRONIC TRANSMISSION.

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&

(incorporated with limited liability in the Republic of the Philippines)

Primary offer of 1,071,429,000 common shares at an Offer Price of P4.30 per common share,with an over-allotment option of up to 160,714,000 common shares, to be listed and traded onthe First Board of The Philippine Stock Exchange, Inc.

International Underwriter and Bookrunner

Maybank Kim Eng Securities Pte Ltd

Domestic Lead Underwriter and Issue Manager

Maybank ATR Kim Eng Capital Partners, Inc.

Participating Domestic Underwriters

Abacus Capital andInvestment Corporation

SB Capital InvestmentCorporation

BDO Capital & InvestmentCorporation

The date of this Prospectus is November 26, 2012


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D&L Industries, Inc.#65 Industria Street,Quezon City 1110PhilippinesTelephone Number: +63-2-635-0680Website: http://www.dnl.com.ph/

This Prospectus relates to the offer and sale on a primary basis of 1,071,429,000 common shares (the“Firm Offer,” and such shares, the “Firm Shares”), par value P1.00 per share (the “Shares”), of D&LIndustries, Inc., a corporation organized under Philippine law (together with its subsidiaries, Oleo-Fats Incorporated, First in Colours, Incorporated, D&L Polymers & Colours, Inc. and Aero-PackIndustries, Inc., and its associate company Chemrez Technologies, Inc., the “Company”). TheShares will be listed and traded on the First Board of The Philippine Stock Exchange, Inc. The FirmShares will be offered at a price of P4.30 per Firm Share (the “Offer Price”). The determination of theOffer Price is further discussed on page 45 of this Prospectus and is based on a book-building processand discussions between the Company, Maybank Kim Eng Securities Pte Ltd (the “InternationalUnderwriter”) and Maybank ATR Kim Eng Capital Partners, Inc. (the “Domestic Lead Underwriter”).

A total of 3,571,428,995 Shares will be outstanding after the Firm Offer. The Firm Shares willrepresent approximately 30.0% of the issued and outstanding capital stock of the Company aftercompletion of the Offer.

The total proceeds to be raised by the Company from the sale of the Firm Shares will beapproximately P4,607.1 million. The net proceeds to be raised by the Company from the sale ofthe Firm Shares (after deduction of estimated fees and expenses) will be approximately P4,397.8million (assuming no exercise of the Over-allotment Option (as defined below)). The Companyintends to use the net proceeds from the Firm Offer for acquisitions and investments, payment offinancial obligations and general corporate purposes. For a more detailed discussion of theCompany’s proposed use of proceeds, see “Use of Proceeds” on page 42 of this Prospectus. TheSelling Shareholder (as defined herein) will receive all proceeds from the sale of the Optional

Shares (as defined below), while the Company will not receive any of such proceeds.

The International Underwriter and Domestic Lead Underwriter will receive a transaction fee fromthe Company based on a percentage of the gross proceeds from the sale of the Offer Shares (asdefined below). This is inclusive of the amounts to be paid to Bancpros & Associates (the“Financial Advisor”), other participating underwriters and selling agents, where applicable. For amore detailed discussion on the fees to be received by the International Underwriter and DomesticLead Underwriter, see “Use of Proceeds” on page 42 of this Prospectus.

Each holder of Shares will be entitled to such dividends as may be declared by the Company’sBoard of Directors (the “Board”), provided that any stock dividend declaration requires theapproval of shareholders holding at least two-thirds of the Company’s total outstanding capital

stock. The Corporation Code of the Philippines, Batas Pambansa Blg. 68 (the “PhilippineCorporation Code”), has defined “outstanding capital stock” as the total shares of stock issued,whether paid in full or not, except treasury shares. The Company has adopted a dividend policy ofdeclaring at least 25% of its prior year’s consolidated net income as a dividend in favor of itsstockholders of record date to be determined by the Board, to be paid from the Company’savailable unrestricted retained earnings. This dividend shall be payable in cash, stock or property,or a combination of the three, as may be determined by the Board and subject to applicable laws,rules and regulations. The dividend payout rate is based on recommendation by the Board and issubject to periodic review and revision, which depends on the Company’s operating expenses,implementation of business plans, working capital requirements, cash flow position and capitalexpenditure requirements, among other factors. Please see a more detailed discussion of theCompany’s dividend policy under “Dividends and Dividend Policy” on page 44 of this Prospectus.


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750,000,300 Firm Shares (the “Institutional Offer Shares”) are being offered and sold outside theUnited States by the International Underwriter in offshore transactions in reliance on Regulation S(“Regulation S”) under the United States Securities Act of 1933, as amended (the “U.S. SecuritiesAct”) (the “Institutional Offer”).

321,428,700 Firm Shares (the “PSE and LSI Offer Shares”) are being offered in the Philippines toall of the trading participants of the Philippine Stock Exchange (“PSE”) (the “PSE TradingParticipants”) and to local small investors (the “LSIs”) under the Local Small Investors Program inthe Philippines (the “PSE and LSI Offer”). PSE and LSI Offer Shares not taken up by the PSETrading Participants and the LSIs shall be distributed by the Domestic Lead Underwriter to itsrespective clients or to the general public. PSE and LSI Offer Shares not taken up by the PSETrading Participants, the Domestic Lead Underwriter’s clients or the general public shall bepurchased by the Domestic Lead Underwriter.

In any case, the amount of Offer Shares to be made available to the PSE Trading Participants andLSIs will be at least 20% and 10%, respectively, of the Firm Shares.

Jadel Holdings, Co., Inc. (“the Selling Shareholder”) has granted Maybank ATR Kim Eng CapitalPartners, Inc., in its role as stabilizing agent (the “Stabilizing Agent”), an option exercisable inwhole or in part from and including the date of listing and when trading of the Shares commenceson the PSE (the “Listing Date”) and ending on the date 30 calendar days from and including theListing Date to purchase up to an additional 160,714,000 Shares at the Offer Price (the “OptionalShares”), on the same terms and conditions as the Firm Shares as set forth in this Prospectus,solely to cover over-allotments, if any (the “Over-Allotment Option”). The Firm Shares and theOptional Shares are referred to as the “Offer Shares,” and the offer of the Offer Shares is referredto as the “Offer.” The Optional Shares will be sold as part of the Institutional Offer. See “Plan ofDistribution” on page 156 of this Prospectus.

All of the Shares issued and to be issued pursuant to the Offer have, or will have, identical rights

and privileges. The Shares may be owned by any person or entity regardless of citizenship ornationality, subject to the nationality limits under Philippine law.

The allocation of the Firm Shares between the PSE and LSI Offer and the Institutional Offer issubject to adjustment. In the event of an under-application in the Institutional Offer and acorresponding over-application in the PSE and LSI Offer, Firm Shares in the Institutional Offermay be reallocated to the PSE and LSI Offer. If there is an under-application in the PSE and LSIOffer and if there is a corresponding over-application in the Institutional Offer, Firm Shares in thePSE and LSI Offer may be reallocated to the Institutional Offer. The reallocation shall not apply inthe event of over-application in both the PSE and LSI Offer and the Institutional Offer.

The listing of the Offer Shares is subject to the approval of the PSE. An application to list the

Offer Shares as well as the rest of the Shares was approved on November 14, 2012. Such anapproval for listing is permissive only and does not constitute a recommendation or endorsementby the PSE or the Philippine Securities and Exchange Commission (the “Philippine SEC”) of theShares.

Before making an investment decision, prospective investors should carefully consider the risksassociated with an investment in the Shares. These risks include:

• risks relating to the Company and its businesses;

• risks relating to the Philippines;

•

risks relating to the Offer and the Shares; and


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• risks relating to certain statistical information in this Prospectus.

See the section entitled “Risk Factors” beginning on page 26 of this Prospectus, which, while notintended to be an exhaustive enumeration of all risks, must be considered in connection with apurchase of the Offer Shares.

ALL REGISTRATION REQUIREMENTS HAVE BEEN MET AND ALL INFORMATIONCONTAINED HEREIN IS TRUE AND CURRENT.

The Offer Shares are offered subject to the receipt and acceptance of any order by the Companyand subject to the Company’s right to reject any order in whole or in part. It is expected that theOffer Shares will be delivered in book-entry form against payment thereof to the PhilippineDepository and Trust Corporation (the “PDTC”) on or about December 12, 2012.

By:(original signed)

John L. LaoPresident and Chief Executive Officer


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No representation is made by the Company, the Selling Shareholder, the International Underwriter orthe Domestic Lead Underwriter regarding the legality of an investment in the Offer Shares under anylegal, investment or similar laws or regulations. The contents of this Prospectus are not investment,legal or tax advice. Prospective investors should consult their own counsel, accountant and otheradvisors as to legal, tax, business, financial and related aspects of a purchase of the Offer Shares. Inmaking any investment decision regarding the Offer Shares, prospective investors must rely on theirown examination of the Company and the terms of the Offer, including the merits and risks involved.

THE OFFER SHARES ARE BEING OFFERED ON THE BASIS OF THIS PROSPECTUS ONLY.ANY DECISION TO PURCHASE THE OFFER SHARES MUST BE BASED ONLY ON THEINFORMATION CONTAINED HEREIN.

The Offer Shares have not been and will not be registered under the U.S. Securities Act and are notbeing offered or sold in the United States. The Offer Shares may be subject to certain transferrestrictions as described herein.

No person has been authorized to give any information or to make any representations other than

those contained in this Prospectus and, if given or made, such information or representations must notbe relied upon as having been authorized by the Company, the Selling Shareholder, the InternationalUnderwriter or the Domestic Lead Underwriter. This Prospectus does not constitute an offer to sell orthe solicitation of an offer to purchase any securities other than the Offer Shares or an offer to sell orthe solicitation of an offer to purchase such securities by any person in any circumstances in whichsuch offer or solicitation is unlawful. Neither the delivery of this Prospectus nor any sale of the OfferShares offered hereby shall, under any circumstances, create any implication that there has been nochange in the affairs of the Company since the date hereof or that the information contained herein iscorrect as of any time subsequent to the date hereof.

The distribution of this Prospectus and the offer and sale of the Offer Shares in certain jurisdictionsmay be restricted by law. The Company, the Selling Shareholder, the International Underwriter and

the Domestic Lead Underwriter require persons into whose possession this Prospectus comes toinform themselves about and to observe any such restrictions. This Prospectus does not constitute anoffer of, or an invitation to purchase, any of the Offer Shares in any jurisdiction in which such offer orinvitation would be unlawful. Each prospective purchaser of the Offer Shares must comply with allapplicable laws and regulations in force in any jurisdiction in which it purchases, offers, sells orresells the Offer Shares or possesses and distributes this Prospectus and must obtain any consents,approvals or permissions required for the purchase, offer, sale or resale by it of the Offer Shares underthe laws, rules and regulations in force in any jurisdiction to which it is subject or in which it makessuch purchases, offers, sales or resales, and none of the Company, the Selling Shareholder, theInternational Underwriter and the Domestic Lead Underwriter shall have any responsibility therefor.

In connection with the Offer, the Stabilizing Agent or any person acting on its behalf may over-allot

Offer Shares or effect transactions with a view to supporting the market price of the Offer Shares at alevel higher than that which might otherwise prevail for a limited period after the Listing Date.However, there is no assurance that the Stabilizing Agent (or any person acting on behalf of theStabilizing Agent) will undertake stabilization activities. Any stabilization activities may begin on orafter the Listing Date and, if begun, may be ended at any time, but must end no later than 30 calendardays from and including the Listing Date. Any stabilization activities shall be done in compliancewith all applicable laws, regulations and rules. The total number of Offer Shares which the StabilizingAgent or any agent of it may buy to undertake any stabilizing activities shall not exceed 15% of theaggregate number of the Firm Shares.

The Company and the Selling Shareholder reserve the right to withdraw the offer and sale of OfferShares at any time, and the International Underwriter and the Domestic Lead Underwriter reserve

the right to reject any commitment to subscribe for the Offer Shares in whole or in part and to allotto any prospective purchaser less than the full amount of the Offer Shares sought by such


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purchaser. If the Offer is withdrawn or discontinued, the Company shall subsequently notify thePhilippine SEC and the PSE. The International Underwriter, the Domestic Lead Underwriter andcertain related entities may acquire for their own account a portion of the Offer Shares.

In this Prospectus, unless otherwise specified or the context otherwise requires, all references tothe “D&L Industries” are to D&L Industries, Inc. on an unconsolidated basis. All references to the“Company” are to D&L Industries, Inc. and its consolidated subsidiaries, Oleo-Fats Incorporated,First in Colours, Incorporated, D&L Polymers & Colours, Inc. and Aero-Pack Industries, Inc., andits associate company Chemrez Technologies, Inc. All references to the “Philippines” arereferences to the Republic of the Philippines. All references to the “Government” or the “NationalGovernment” are to the national government of the Philippines. All references to the “BSP” arereferences to Bangko Sentral ng Pilipinas, the central bank of the Philippines. All references to“United States” or “U.S.” are to the United States of America. All references to “Philippine peso,”“Pesos” and “P” are to the lawful currency of the Philippines, and all references to “U.S. dollars”and “U.S.$” are to the lawful currency of the United States. The Company publishes its financial

statements in Pesos.

This Prospectus contains translations of certain Peso amounts into U.S. dollar amounts at specifiedrates solely for the convenience of the reader. These translations should not be construed asrepresentations that the Peso amounts represent such U.S. dollar amounts or could be, or couldhave been, converted into U.S. dollars at the rates indicated or at all. Unless otherwise indicated,all translations from Pesos to U.S. dollars have been made at a rate of P41.907 = U.S.$1.00, theclosing spot rate quoted on the Philippine Dealing System on July 31, 2012. On November 15,2012, the closing spot rate quoted on the Philippine Dealing System was P41.112 = U.S.$1.00. See“Exchange Rates” for further information regarding the rates of exchange between the Peso and theU.S. dollar.

Certain statistical information and forecasts in this Prospectus relating to the Philippines and otherdata used in this Prospectus were obtained or derived from internal surveys, market research,governmental data, publicly available information and/or industry publications. Industry publicationsgenerally state that the information they contain has been obtained from sources believed to bereliable. However, there is no assurance that such information is accurate or complete. Similarly,internal surveys, industry forecasts, market research, governmental data, publicly availableinformation and/or industry publications have not been independently verified by the Company, theInternational Underwriter or the Domestic Lead Underwriter and may not be accurate, complete, up-to-date, balanced or consistent with other information compiled within or outside the Philippines.

The Company’s financial statements are reported in Pesos and are prepared based on itsaccounting policies, which are in accordance with the Philippine Financial Reporting Standards(“PFRS”) issued by the Financial Reporting Standards Council of the Philippines. PFRS includestatements named PFRS and Philippine Accounting Standards, and Philippine Interpretations fromInternational Financial Reporting Interpretations Committee.

The pro-forma condensed consolidated financial information for the Company as of and for theyears ended December 31, 2009, 2010 and 2011 and the seven months ended July 31, 2011 and2012, included in this Prospectus, was derived from the separate historical financial statements ofD&L Industries, each of its subsidiaries and Chemrez Technologies, Inc., also included in this

Prospectus, adjusted to give pro-forma effect to (i) acquisition of a controlling interest in Oleo-FatsIncorporated and a non-controlling interest in Aero-Pack Industries, Inc., First in Colours, Inc. and


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D&L Polymer and Colours, Inc., resulting in the Company having 100% ownership of these entities;and (ii) the Company’s divestment of a controlling interest in FIC Marketing Co. and D&L PowderCoating, Inc., as if all such transactions occurred on January 1, 2009, and prepared in accordance withthe Company’s assumptions which are described in the notes to the pro-forma condensed consolidatedfinancial statements and reviewed by Isla Lipana & Co., a PwC member firm (“Isla Lipana”), inaccordance with Philippine Standards on Assurance Engagements 3000 - Assurance EngagementsOther than Audits or Reviews of Historical Financial Information (“PSAE 3000”) and SECMemorandum Circular No. 2 Series of 2008, Guidelines on Reporting and Attestation of Pro-FormaFinancial Information (“SEC Memo 2-2008”) issued by the Philippine Securities and ExchangeCommission.

The historical amounts in the pro-forma condensed consolidated financial statements as of and for theseven months ended July 31, 2011 and 2012, and as of and for the years ended December 31, 2009,2010 and 2011 are derived from the separate historical financial statements of D&L Industries, eachof its subsidiaries and Chemrez Technologies, Inc., which were audited by Isla Lipana in accordancewith Philippine Standards on Auditing (“PSA”) and prepared in accordance with PhilippineAccounting Standards 34 – Interim Financial Reporting (“PAS 34”) and Philippine Financial

Reporting Standards (“PFRS”), except for the Company’s separate financial statements as of and forthe years ended December 31, 2009 and 2010, which were audited by another accountant, Armando T.Llovido.

Figures in this Prospectus have been subject to rounding adjustments. Accordingly, figures shown inthe same item of information may vary, and figures which are totals may not be an arithmeticaggregate of their components.

The Company’s fiscal year begins on January 1 and ends on December 31 of each year.

This Prospectus contains forward-looking statements that are, by their nature, subject to significantrisks and uncertainties. These forward-looking statements include, without limitation, statementsrelating to:

• known and unknown risks;

• uncertainties and other factors that may cause the Company’s actual results, performance orachievements to be materially different from any future results; and

• performance or achievements expressed or implied by forward-looking statements.

Such forward-looking statements are based on numerous assumptions regarding the Company’s

present and future business strategies and the environment in which the Company will operate inthe future. Important factors that could cause some or all of the assumptions not to occur or causeactual results, performance or achievements to differ materially from those in the forward-lookingstatements include, among other things:

• the Company’s ability to successfully implement its strategies;

• the Company’s ability to anticipate and respond to market trends;

• the Company’s ability to successfully manage its growth;

• the condition of and changes in, the Philippine, Asian or global economies;

• any future political instability in the Philippines;


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• the Company’s ability to secure additional financing;

• changes in interest rates, inflation rates and the value of the Peso against the U.S. dollar andother currencies;

•

changes in laws, rules and regulations, including tax laws and licensing requirements, in thePhilippines; and

• competition in the Philippine food ingredients; colorants and plastic additives; oleochemicals,resins and powder coatings; and aerosol industries.

Additional factors that could cause the Company’s actual results, performance or achievements todiffer materially from forward-looking statements include, but are not limited to, those disclosedunder “Risk Factors” and elsewhere in this Prospectus. These forward-looking statements speakonly as of the date of this Prospectus. The Company, the Selling Shareholder, the InternationalUnderwriter and the Domestic Lead Underwriter expressly disclaim any obligation or undertakingto release, publicly or otherwise, any updates or revisions to any forward-looking statement

contained herein to reflect any change in the Company’s expectations with regard thereto or anychange in events, conditions, assumptions or circumstances on which any statement is based.

This Prospectus includes statements regarding the Company’s expectations and projections forfuture operating performance and business prospects. The words “believe,” “plan,” “expect,”“anticipate,” “estimate,” “project,” “intend” and similar words identify forward-looking statements.In addition, all statements other than statements of historical facts included in this Prospectus areforward-looking statements. Statements in the Prospectus as to the opinions, beliefs and intentionsof the Company accurately reflect in all material respects the opinions, beliefs and intentions of itsmanagement as to such matters as of the date of this Prospectus, although the Company gives noassurance that such opinions or beliefs will prove to be correct or that such intentions will notchange. This Prospectus discloses, under the section “Risk Factors” and elsewhere, important

factors that could cause actual results to differ materially from the Company’s expectations. Allsubsequent written and oral forward-looking statements attributable to the Company or personsacting on behalf of the Company are expressly qualified in their entirety by the above cautionarystatements.


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Table of Contents

Page

GLOSSARY OF TERMS......................................................................................................... 1

SUMMARY ............................................................................................................................. 8

SUMMARY OF THE OFFER ............................................................................................... 15

SUMMARY FINANCIAL INFORMATION ......................................................................... 22

RISK FACTORS ................................................................................................................... 26

EXCHANGE RATES ............................................................................................................ 41

USE OF PROCEEDS ............................................................................................................. 42

DIVIDENDS AND DIVIDEND POLICY .............................................................................. 44

DETERMINATION OF THE OFFER PRICE........................................................................ 45

CAPITALIZATION AND INDEBTEDNESS ........................................................................ 46

DILUTION ............................................................................................................................ 47

SELECTED FINANCIAL INFORMATION .......................................................................... 49

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS ............................................................................................... 53

BUSINESS ............................................................................................................................ 75

REGULATORY AND ENVIRONMENTAL MATTERS .................................................... 110

INDUSTRY ......................................................................................................................... 118BOARD AND SENIOR MANAGEMENT .......................................................................... 125

PRINCIPAL SHAREHOLDERS AND SELLING SHAREHOLDER .................................. 131

RELATED PARTY TRANSACTIONS ............................................................................... 133

DESCRIPTION OF THE SHARES ..................................................................................... 135

THE PHILIPPINE STOCK MARKET ................................................................................. 143

PHILIPPINE FOREIGN EXCHANGE REGULATIONS .................................................... 155

PLAN OF DISTRIBUTION ................................................................................................. 156

LEGAL MATTERS ............................................................................................................. 161

INDEPENDENT AUDITORS ............................................................................................. 162

INDEX TO FINANCIAL STATEMENTS ........................................................................... F-1


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In this Prospectus, unless the context otherwise requires, the following terms shall have the meaningsset forth below.

TERMS RELATED TO THE OFFER

Aero-Pack ................................................. Aero-Pack Industries, Inc.

Applicant .................................................. A person, whether natural or juridical, who seeks tosubscribe for the Offer Shares

Application................................................ An application to subscribe for Offer Shares pursuant tothe Offer

BIR ........................................................... Philippine Bureau of Internal Revenue

Board ........................................................ Board of Directors of the Company

BSP ........................................................... Bangko Sentral ng Pilipinas, the Philippine CentralBank

Chemrez .................................................... Chemrez Technologies, Inc., listed on the PSE underthe symbol “COAT”

Company ................................................... D&L Industries, Inc. and its consolidated subsidiaries,Oleo-Fats Incorporated, Aero-Pack Industries, Inc.,First in Colours, Incorporated and D&L Polymers &Colours, Inc., and its affiliate Chemrez Technologies,Inc. (including its subsidiary, Chemrez, Inc.)

D&L Industries ......................................... D&L Industries, Inc. on an unconsolidated basis

DLPC ........................................................ D&L Polymers & Colours, Inc. DOE .......................................................... The Philippine Department of Energy

Domestic Lead Underwriter ....................... Maybank ATR Kim Eng Capital Partners, Inc.

FIC ............................................................ First in Colours, Incorporated

Financial Advisor ...................................... Bancpros & Associates

Firm Offer ................................................. The offering for sale of the Firm Shares on, and subjectto, the terms and conditions stated herein

Firm Shares ............................................... 1,071,429,000 Shares being sold on a primary basispursuant to the Firm Offer

Government .............................................. The Government of the Republic of the Philippines

Institutional Offer ...................................... The offer for sale of the Institutional Offer Sharesoutside of the U.S. in offshore transactions in relianceon Regulation S

Institutional Offer Shares ........................... 750,000,300 of the Offer Shares being offered for salepursuant to the Institutional Offer

Isla Lipana & Co. ...................................... Isla Lipana & Co., a member firm ofPricewaterhouseCoopers International Limited

Lao Family ................................................ Dean L. Lao, Leon L. Lao, Alex L. Lao, Yin Yong Lao,John L. Lao and their relatives within the fourth degreeof consanguinity


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International Underwriter .......................... Maybank Kim Eng Securities Pte Ltd

LSI ............................................................ A local small investor, i.e. a subscriber who is willingto subscribe to a minimum board lot or whosesubscription does not exceed P25,000

Metro Manila ............................................ the metropolitan area comprising the cities of Caloocan,Las Piñas, Makati, Malabon, Mandaluyong, Manila,Marikina, Muntinlupa, Navotas, Parañaque, Pasay,Pasig, Pateros, Quezon City, Valenzuela, Taguig andSan Juan, which together comprise the “NationalCapital Region” and are commonly referred to as“Metro Manila”

NSCB........................................................ Philippine National Statistics Coordination Board

Offer ......................................................... the offering for sale of the Offer Shares pursuant to thePSE and LSI Offer and the Institutional Offer on, andsubject to, the terms and conditions stated herein

Offer Price ................................................ P4.30, the price per Offer Share at which the OfferShares are to be purchased pursuant to the Offer

Offer Shares .............................................. The Firm Shares and the Optional Shares

Oleo-Fats .................................................. Oleo-Fats Incorporated

Optional Shares ......................................... Up to 160,714,000 Shares to be sold upon exercise ofthe Over-Allotment Option

Over-Allotment Option .............................. The option exercisable in whole or in part from andincluding the Listing Date and ending on the date 30calendar days from and including the Listing Date to begranted by the Selling Shareholder to Maybank ATR

Kim Eng Capital Partners Inc., to require the SellingShareholder to sell the Optional Shares

PAS........................................................... Philippine Accounting Standards

PCD .......................................................... Philippine Central Depository

PCD Nominee ........................................... PCD Nominee Corporation, a corporation whollyowned by the PDTC

PDS........................................................... The Philippine Dealing System

PDTC ........................................................ The Philippine Depository and Trust Corporation, thecentral securities depositary of, among others, securities

listed and traded on the PSE Pesos or P .................................................. The lawful currency of the Philippines

PEZA Philippine Economic Zone Authority

PFRS ......................................................... Philippine Financial Reporting Standards

Philippine Corporation Code ..................... Corporation Code of the Philippines, Batas PambansaBlg. 68

Philippine Renewable Energy Act ............. Republic Act. No. 9513, or the Renewable Energy Actof 2008

Philippine SEC .......................................... The Philippine Securities and Exchange Commission

Philippines ................................................ Republic of the Philippines


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PSA........................................................... Philippine Standards on Auditing

PSE ........................................................... The Philippine Stock Exchange, Inc.

PSE and LSI Offer ..................................... The offer for sale of the PSE and LSI Offer Shares to bemade in the Philippines

PSE and LSI Offer Shares ......................... 321,428,700 of the Offer Shares being offered pursuantto the PSE and LSI Offer

PSE Trading Participants ........................... Duly licensed securities brokers who are tradingparticipants of the PSE

Regulation S .............................................. Regulation S under the U.S. Securities Act

SCCP ........................................................ Securities Clearing Corporation of the Philippines

Selling Shareholder ................................... Jadel Holdings Co., Inc.

Shares ....................................................... the common shares of par value P1.00 each of theCompany

SRC .......................................................... Securities Regulation Code of the Philippines (RA8799) and its implementing rules, as amended

Stabilizing Agent ....................................... Maybank ATR Kim Eng Capital Partners, Inc., in itsrole as stabilizing agent, whereby it may engage instabilization activities relating to any over-allotment ofShares from the Selling Shareholder for a periodbeginning on or after the First Closing Date butextending no later than 30 days from and including theListing Date

U.S. or United States ................................. United States of America

U.S.$ or U.S. dollar ................................... The lawful currency of the United StatesU.S. Securities Act .................................... The United States Securities Act of 1933, as amended


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OTHER TERMS AND ABBREVIATIONS

acid degumming ........................................ A process wherein crude oil is mixed with phosphoricacid in a dynamic high shear mixer; a degummingreaction then takes place in a degumming tank, afterwhich caustic acid may be used to remove excessphosphoric acid and gums are removed in a centrifugalseparator

additive ..................................................... Materials added in minor amounts to basic resins orcompounds to improve a polymer’s performance duringprocessing, or tailor a polymer’s performance

capabilities for end use.

aerosol....................................................... A liquid substance, as a disinfectant or deodorant,sealed in a metal container under pressure with an inert

gas or other activating agent and released as a spray orfoam through a push-button valve or nozzle

AMF ......................................................... Anhydrous milk fat; a product that must contain at least99.8% milk fat and be made from fresh cream or butter

amide ........................................................ Non-ionic surfactants used as a foam booster and foamstabilizer in soaps, detergent and shampoos

amphoteric ................................................ Capable of functioning as an acid as well as a base

betaine....................................................... Mild foaming amphoteric surfactants known to givebetter cleaning performance for hair shampoos

biodiesel .................................................... A vegetable oil- or animal fat-based diesel fuelconsisting of long-chain alkyl (methyl, propyl or ethyl)esters

bleaching ................................................... The action of further removing colouring matter froman oil or fat usually after the neutralising process

bleaching earth .......................................... An absorbent clay that removes coloring from oils

CAGR ....................................................... Compound annual growth rate

caustic solution .......................................... Any corrosive chemical solution that can burn orotherwise destroy materials

chromatography......................................... A set of laboratory techniques for the separation of

mixtures CIP ............................................................ Clean-in-place, a method of cleaning the interior

surfaces of pipes, vessels, process equipment, filtersand associated fittings, without disassembly

CME ......................................................... Coconut methyl ester, also known as Coco-Biodiesel,formed through a reaction of coconut oil and methanol,and used as a diesel fuel or enhancer

coconut oil ................................................ An oil high in saturated fat made by pressing thecoconut meat (“copra”), which is used in frying, as aningredient in many packaged goods, and as a liquid

biofuel colorant ..................................................... Something added to something else to cause a change in


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color, such as dyes, pigments or paint

crude oil .................................................... An oil obtained from a natural source, before anyrefining process has taken place or after only partialrefining

deodorization............................................. The final process in the refining of oils and fats, whichinvolves the removal of all odoriferous compoundsremaining after the neutralising and bleachingoperations have been carried out

emulsion.................................................... A mixture of two liquids which do not normally mixachieved by dispersing one liquid in the other liquid;examples include vinaigrettes, milk and mayonnaise

ester .......................................................... Any of a class of organic compounds that react withwater to produce alcohols and organic or inorganicacids

extrusion ................................................... A process used to create objects of a fixed, cross-

sectional profile

fat.............................................................. A mixture of triglycerides which is solid at normaltemperatures

glycerin ..................................................... Colorless, odorless, viscous liquid widely used inpharmaceutical formulations

GMP ......................................................... Good manufacturing practice

HACCP ..................................................... Hazard analysis and critical control point

hydrogenation ........................................... A process by which oils and fats that containunsaturated fatty acids have these changed to saturated

acids by combination with hydrogen, raising themelting point

I.M.I. ........................................................ Incoming Materials Inspection

IMS ........................................................... Integrated Management Systems

ISO ........................................................... International Organization for Standardization

interesterification ....................................... A process by which fatty acids have been moved fromone triglyceride molecule to another. This is generallydone to modify the melting point, slow rancidificationand create an oil more suitable for deep frying ormaking margarine with good taste and low saturated fat

content m2 ............................................................. Square meter

MTPA ....................................................... Metric tons per annum

OHSAS ..................................................... The internationally recognized standard foroccupational health and safety management systems

olein .......................................................... The liquid portion of an oil or fatty acid mixture whichhas been separated either by fractionation or pressing

oleochemical ............................................. Chemicals derived from plant oils

palm kernel oil .......................................... An edible plant oil high in saturated fat derived from

the kernel of the oil palm palm oil ..................................................... The reddish-orange oil derived from the pulp of the


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fruit of the African palm tree, containing a very highpercentage of saturated fat

polyethylene .............................................. The most common plastic; a polymer that is pliable andmoldable above a certain temperature, and return to asolid state when cooled.

polymer ..................................................... A natural or synthetic compound of high molecularweight consisting of up to millions of repeated linkedsimple molecule units, often used in the manufacturingof plastics

polymer emulsion ...................................... The process of enabling large molecules built up chieflyfrom a large number of similar units bonded together(polymers) to remain in suspension dispersed evenlywithin a solvent even though they are too large toactually dissolve in the solvent

polypropylene ........................................... A thermoplastic polymer used in a wide variety of

applications including packaging and labelling, plasticparts, etc.

powder coating .......................................... Protective materials applied to metal and other surfacesthrough an electrostatic coating process to provideresistance against heat, weather, UV light and certainchemicals

rapeseed (canola) oil .................................. An oil expressed from rapeseeds, which contains moremonounsaturated fat than any other oil except for oliveoil

RBD .......................................................... Refined, bleached and deodorized

resin .......................................................... Polymerized or chemically modified substances whichare manufactured in accordance with a variety oftechnical specifications to suit specific industry uses,end-user applications, and customer requirements

RoHS ........................................................ Restrictions on hazardous substances

saturated fat ............................................... A fat that has no double bonds between the individualcarbon atoms of the fatty acid chain, thus is fully“saturated” with hydrogen atoms; it comes mainly fromanimal sources as well as certain vegetables and istypically solid at room temperature

shortening ................................................. A hydrogenated vegetable oil that prevents cross-linkage between gluten molecules, allowing for theproduction of crumbly pastries

SoC ........................................................... Substances of concern; chemical substances that havean impact on the environment and human health

specialty fats.............................................. Substitutes for other types of fats such as cocoa butter,milk fat, butter, etc.

spectrophotometer ..................................... An instrument which measures the amount of light of aspecified wavelength which passes through a medium

stearin ....................................................... A colorless, odorless, tasteless ester of glycerol and

stearic acid found in most animal and vegetable fats andused in the manufacture of soaps, candles, metal


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polishes and adhesives

surfactant .................................................. A compound which lowers the surface tension of aliquid, the tension between two liquids or between aliquid and a solid. Surfactants may be used to producedetergents, wetting agents, foaming agents and

dispersants, among other products tensile strength .......................................... The maximum stress that a material can withstand

while being stretched or pulled before necking, which iswhen the specimen’s cross-section starts to significantlycontract

thermogravimetric analyzer ....................... A quality control device used to analyze certain of theCompany’s products to determine changes in weight inrelation to a temperature program in a controlledatmosphere

three-piece can .......................................... Cans made up of 1) a bottom lid; 2) a cylindrical body;and 3) a top lid or covering, are generally accepted as

more versatile than two-piece cans. Three-piece cansare typically used for a range of insect control productsand home and personal care, among others

tinting........................................................ The process of adding color tinge

tintometer .................................................. A precision instrument for comparing tints or colorswith those used as arbitrary standards

transesterification ...................................... The chemical process of exchanging the organic groupof an ester with the organic group of an alcohol

trans fat ..................................................... Also known as trans-fatty acids, made by addinghydrogen to vegetable oil through a process called

hydrogenation, which makes the oil less likely to spoil.Trans fat has been recognized as one of the unhealthiestfats, being known to raise cholesterol levels

two-piece can ............................................ Cans which comprise a body (wherein the bottom andcylindrical body constitute a single piece of metal) andone covering lid, are often used for food and beverages,such as canned goods, soft drinks and beer

UL ............................................................ Underwriters Laboratory, an independent, not-for-profitproduct safety testing and certification organization

unsaturated fat ........................................... A fat or fatty acid in which there is at least one double

bond within the fatty acid chain; unsaturated fatmolecules contain somewhat less energy (i.e., fewercalories) than an equivalent amount of saturated fat andcomes mainly from vegetables and plants


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The following summary is qualified in its entirety by, and is subject to, the more detailed information

and financial statements, including notes thereto, appearing elsewhere in this Prospectus. Capitalized

terms not defined in this summary are defined in the “Glossary of Terms,” “Risk Factors,”

“Business” or elsewhere in this Prospectus.

OVERVIEW

The Company is a dynamic industrial group in the Philippines with diversified operations in themanufacture and sale of food ingredients; colorants and plastic additives and compounds;oleochemicals, resins and powder coatings, and aerosol products. The Company produces hundreds ofvariants on its products and focuses its nearly 50 years of expertise on designing innovative,customized and specialty product solutions for its customers, who in turn produce a variety of brand-name consumer products across a range of diverse industries such as food and beverages, oil and gas,personal and home care products, and industrial and commercial manufacturing. The Companybelieves its strong research and development capabilities have allowed it to introduce numerous

market-leading products in the Philippines. The Company has also leveraged its long-standing andproven track record and expertise into collaborative partnerships with its key customers, whichfacilitates greater product customization. Based on its internal data and data derived from itscustomers, the Company believes it is the market leader for each of its primary product categories inthe Philippine market.

The Company is principally a holding company which derives the majority of its income from itssubsidiaries and associates which are engaged in four principal business lines, as set out below:

• Food ingredients – The Company, operating through its subsidiary Oleo-Fats, manufactures a lineof industrial fats and oils, specialty fats and oils, and culinary and other specialty food ingredients.

The Company contract manufactures and provides its food ingredients products to most of theleading food manufacturers and quick-service restaurant chains in the Philippines, and alsoproduces food safety solutions such as cleaning and sanitation agents for various customers;

• Colorants and plastics additives – The Company, operating through its subsidiaries FIC and DLPC,manufactures a line of pigment blends, color and additive masterbatches and engineered polymersfor a wide range of applications, introducing a number of products into the Philippine market andexpanding into the export of certain products overseas. The Company’s products add propertiessuch as precise coloring, reduced friction or increased resistance to degradation for plastics used inconsumer goods, appliances and outdoor furniture;

• Oleochemicals, resins and powder coatings – The Company, operating through its affiliate

Chemrez and its subsidiary Chemrez, Inc., manufactures CME, also known as coco-biodiesel,using the Philippines’ first continuous-process methyl ester plant. The Company also manufacturesother oleochemicals or chemicals derived from vegetable oils, resins such as polystyrene, acrylicemulsions and polyester; and a line of powder coatings; and

• Aerosols – The Company, operating through its subsidiary Aero-Pack, manufactures three-pieceaerosol cans and components and provides aerosol contract filling and compounding services. TheCompany also toll manufactures a range of related products, including insect control, industrialmaintenance chemicals, and home and personal care products, among others.

For the year ended December 31, 2011, the Company’s pro-forma consolidated revenues amounted toP12.8 billion and pro-forma consolidated profit before income taxes was P1.3 billion, compared to

pro-forma consolidated revenues of P9.9 billion and P9.2 billion and pro-forma consolidated profitbefore income taxes of P857.6 million and P191.1 million in 2010 and 2009, respectively,


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representing a CAGR between 2009 and 2011 of 18.4% in consolidated revenues and 157.9% inconsolidated profit before income taxes. For the seven months ended July 31, 2012, the Company’sconsolidated revenues were P6.8 billion and estimated consolidated profit before income taxes wasP804.8 million, compared to consolidated revenues of P7.6 billion and consolidated profit beforeincome taxes of P934.8 million for the seven months ended July 31, 2011, a decrease of 10.5% inconsolidated revenues and 13.9% in consolidated profit before income taxes.

COMPETITIVE STRENGTHS

The Company believes that it possesses the following principal strengths enabling it to competeeffectively in its businesses:

Focus on innovation and development of specialty products

Operating in technology-intensive businesses, the Company focuses a significant portion of itsresources on product innovation, using its experience, expertise and research and developmentcapabilities to constantly supplement, update and improve its product portfolio. As a result, the

Company believes that it has been able to introduce a number of innovative products into thePhilippine market, many of which are used by a number of key clients. For example, through its foodingredients business, the Company introduced an innovative vegetable oil which substitutes for thefatty acid profile of breast milk, allowing for the production of proprietary substitutes for milkproducts, as well as a hydrogenated lauric oil used to produce ice cream at lower cost compared withimported milk fat. Moreover, in 1997, through its colorants and plastic additives business theCompany responded to feedback by certain customers with respect to their production processes byformulating and introducing a line of purging compounds into the market. These productsimmediately improved operational efficiency by significantly reducing the turnaround times in whicha customer could re-use its production lines for a different product. The Company has built on thissuccessful launch and now sells these purging compounds to a wider range of customers. TheCompany has also introduced a number of innovative aerosol products, including a line of scented,

non-greasy interior and exterior automotive and motorcycle dressings and an environmentally-friendly diesel fuel line cleaner. The Company believes that its ability to innovate new products addsvalue to its customers’ processes and diversify the Company’s revenue streams give it a significantcompetitive advantage.

Advanced technical expertise for custom production

The Company believes its extensive experience and commitment to research and development hasallowed it to build its technical expertise, with the technologies it uses being among the mostadvanced in Asia. The Company believes it has been able to leverage this considerable technicalexpertise and knowhow to adjust and tailor its products according to its customers’ precisespecifications and requirements. Moreover, as a result of its experience and advanced production

processes, the Company has the ability to respond quickly to requests for high-quality customizedproducts, notably as set out below.

Food ingredients. Customized product development currently accounts for a significantportion of Oleo-Fat’s revenue. It has diversified manufacturing capabilities that enables it totransform food ingredients into customized products, such as infusing various fats and oilswith special flavors in large volumes to suit the recipe and franchise distribution requirementsof the largest quick-service restaurant chains. Its comprehensive packing lines and logisticssystem also enable it to serve large industrial customers buying in bulk as well as traditionaltrade customers that purchase in smaller packaging such as cartons and sachets. Othercustomized products include flavored specialty vegetable oils which mimic certain animal fatsand cater to specific religious and mandated health requirements, customized chocolate

coatings to replace imports used in ice cream production, and customized ice cream mixes tolower production costs for certain novelty desserts.


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Colorants and plastic additives. The Company upgrades its equipment for its colorants andadditives business on a regular basis, as required by technological advances in the industry.The Company utilizes these new technologies to enhance its ability to customize its plasticsproducts to ensure precise color, the required mechanical and thermal properties, as well asother requested properties such as tensile strength, impact resistance, processing speed,flammability and heat resistance.

Oleochemicals, resins and powder coatings. The Company ensures that it remains at thetechnological forefront for product development and application testing through itscomprehensive analytical and applications laboratory. This allows the Company to customizecertain products, such as resins and oleochemicals, in close technical collaboration with local,regional and multinational clients.

Aerosols. The Company believes it is the first and only Philippine company to design anddevelop customized aerosol products focusing on home care, personal care and maintenancechemicals. The Company also supplies three-piece aerosol cans and components, whichcomprise the majority of aerosol product requirements in the Philippines and globally. The

Company’s experience and technical expertise allows it to typically produce a diverse range ofproducts based on its customers’ requirements. Customized products include a brake and partscleaner, an aerosol wound spray designed to treat injured cattle and livestock, an insect spraydesigned for direct sales and a line of automatic air fresheners and disinfectants withcustomized scents designed for interiors such as malls and wash rooms.

In addition, by continually leveraging the latest technology across its business processes, theCompany believes it has developed a reputation for quality and efficiency, and has also been able toreduce its production costs, resulting in a significant competitive advantage. The Company hasestablished a state-of-the-art analytical laboratory which throughout the years, has significantlyenhanced its capability in the research, design and development of new products and in the reverseengineering of existing products. In August 2009, this lab was awarded a Certificate of Accreditation

as an ISO 17025 Chemical Testing Lab by the Department of Trade and Industry’s PhilippineAccreditation Office, attesting to its high-quality facilities and employees. The Company hascontinuously upgraded this and its other application laboratories to allow it to continuously seek andimplement innovations across the Company’s entire product design and development cycle.

Strong track record resulting in long-term collaborative relationships

The Company has nearly five decades of operating history in the Philippines, offering high qualityproducts and services which have established it as a leader in its businesses and has resulted in acustomer base comprising some of the largest Philippine and multinational corporations. Moreimportantly, the Company believes that its experience and track record have enabled it to foster long-standing and collaborative relationships with most of its major customers, some of whom the

Company has served for nearly 50 years. Due mainly to its proven track record, the Company’s keycustomers have shown a willingness to commit time and resources to collaborate with the Companyon product development and operational improvements. As a result, the Company often works intandem with its major customers to identify issues in their respective businesses, and then formulateand develop new products or product solutions to address these concerns. In addition, to bolster theserelationships, the Company often supports its sales efforts to customers with after-sales services suchas on-site trouble-shooting, which further strengthens its key relationships. The Company believesthat these strong relationships have been a key driver of its growth over the past years, allowing it tosteadily increase the products sold to long-standing customers, as well as presenting numerous cross-selling opportunities across its product portfolio to such customers. In addition, the Company believesits strong relationships help it retain the loyalty of such key customers, which is difficult to replicate,presenting a significant barrier to entry against potential competitors.


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Experienced management team with a proven track record

The Company’s management team is comprised of knowledgeable and experienced industry expertswith a proven track record in chemicals and related industries. The Company’s senior managementmembers have an average of over 40 years of industry experience. The Company’s production plantsand research and development facility are staffed by technicians and senior engineers with significantskills and experience in operating production facilities and product development, respectively. Manyof the Company’s executive officers hold publicly-recognized industry organization posts, and enjoywide recognition throughout the industry. The Company believes its experienced management teamhas been a key to its past success and will continue to contribute to its future growth.

Streamlined corporate structure and organization to maximize efficiency and reduce costs

The Company has adopted a “flat” organizational structure across D&L Industries, its subsidiaries andassociates, with D&L Industries providing numerous shared services at a centralized level to itssubsidiaries and associates, including management, research & development, product development,warehousing and logistics, among others. This structure not only helps the Company monitor costs

with respect to these services, but also to act dynamically and make quick decisions to respond tochanges in market conditions. Compared to other competitors with more hierarchical organizationalstructures, the Company believes that it derives substantial synergies and efficiencies from itsstructure, allowing it a significant competitive advantage. For example, the Company believes that itswell-developed logistics platform allows it to effectively supervise inventory management at its sevenon-site warehouses at its production facilities. Moreover, the Company’s integrated handling, storageand delivery facilities allow it to more efficiently manage its distribution capabilities across itsbusinesses.

Well-positioned to benefit from industry trends and increasing demand for environmentallyfriendly products

The continued growth of the Philippine economy has resulted in both a rise in consumer spending andan expansion of the service sector. This rapid growth has led to an expansion of the industries inwhich the Company’s customers operate, such as those related to food and beverage, quick-servicerestaurants, packaging, furniture and other household products. According to data from the NationalStatistics Coordination Board (“NSCB”), as derived from GDP, total Philippine personal consumptionexpenditures increased from approximately P3,731 billion in 2008 to approximately P4,195 billion in2011, representing a CAGR of 4.0%. Total expenditures in the food and non-alcoholic beveragessector also increased significantly from approximately P1,558 billion in 2008 to approximatelyP1,765 billion in 2011, representing a CAGR of 4.3%. Similarly, expenditures in the hotel andrestaurant industry increased from approximately P146 billion in 2008 to approximately P171 billionin 2011, representing a CAGR of 5.5%, while expenditures for furnishing, household equipment andhousehold maintenance increased from P215 billion to P238 billion in the same period, representing a

CAGR of 3.5%. The Company believes it is well-positioned to capture the opportunities such industrytrends have presented due to its leading position in its respective businesses.

In addition, the Company believes the demand for certain of its products will further increase in lightof the increasing focus on the implementation of environmental protection policies by the Philippinegovernment and other governments. For example, the Government passed Republic Act 9367, knownas the Biofuels Act of 2006, which mandates that all diesel fuel contain biodiesel, a main product ofthe Company’s oleochemicals business, at a concentration of 2% from 2009. The Government isconsidering increasing this mandate to 5%, which the Company believes will increase the market andChemrez’s corresponding market share.


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Centralized location and strong logistics platform

The Company’s plants are strategically located within easy reach of suppliers and customers. Itsfoods ingredients plant is located at Mercury Drive, Quezon City, within the vicinity of several foodmanufacturing and warehousing facilities. The Company’s refined vegetable oils and fractionated oilsprocessing plant and tank are located in Sta. Ana, Manila, which is accessible by barge through thePasig River, a main river that traverses through Metro Manila. The Company utilizes a fleet of sixbarges with a total capacity of 10,000 MT. The DLPC plastics facility is located at the PEZA zone inCanlubang, Laguna, where several of its clients are located. The FIC plant, Aero-Pack and Chemrezplants are all located in Bagumbayan, Quezon City which is centrally accessible. This commoncentralized location allows the Company timely and cost-effective deliveries of both raw materialsfrom suppliers and the Company’s products to customers. The Company owns and maintains a fleetof 42 road tankers with a total capacity of over 1,000 MT.

Refined vegetable oils storage capacity provides protection against pricing volatility

The Company’s MRI tank farm and Mercury Plant have an aggregate capacity of 33,000 MT of

vegetable oil, the largest rated capacity in the Philippines. During the past few years, the prices ofcertain vegetable oils in the global market have experienced periods of volatility. The storagecapacity of the Company allows it to physically hedge its vegetable oil purchases, making largerpurchases when prices decrease, and reducing purchases when prices increase. This allows theCompany to competitively price its products and maintain customer satisfaction.

BUSINESS STRATEGIES

Maintain market leading positions in its respective markets and businesses

The Company intends to maintain its market leading positions in the industries in which it operates byleveraging its existing long-term relationships with its customers and research and development

capabilities to produce tailor-made solutions that meet each customer’s evolving needs. TheCompany believes that relationships will continue to be the key driver in developing businessopportunities and increasing sales. It intends to increase training for specialized marketing teams foreach of its business lines to better market the Company’s design and research and developmentcapabilities. The Company intends to maintain close contact with its customers and seeks tounderstand their businesses better in order to offer them a marketable range of products, as well aspotentially cross-sell other Company products.

Continuously innovate to develop new or more efficient products

The Company intends to continuously innovate to develop and introduce new or more efficientcustomized and specialty products for its customers. Utilizing its considerable experience and track

record in its businesses, along with its technical expertise and research and development resources,the Company intends to keep abreast of technological advancements and process improvements andintegrate and apply these to its operations. The Company also intends to take advantage of its strongrelationships with its large key customers by taking and utilizing the valuable feedback from thecustomers to develop new customized products to anticipate and meet their requirements. TheCompany believes that paying close attention to advances in the market and constantly seeking toinnovate and develop new or more efficient products is key in its businesses.

Capitalize on the growing Philippine domestic markets

Many of the end-use products which contain the Company’s products are marketed to middle-classconsumers. The Company believes that the Philippine middle class will continue to grow, increasing

demand for added value products such as specialty foods and a variety of consumer goods. Suchretail consumer demand will in turn increase demand for the Company’s products, such as food


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ingredients, engineered polymers, oleochemicals and aerosol products. In particular, the Companyexpects demand for household items produced by its aerosol business line, such as household insectcontrol products, air fresheners, furniture polish and personal care products to increase significantlywith the increase in household consumers’ disposable income.

Philippine GDP grew by 6.6% in 2007 and by 4.2% in 2008, driven by consumption and investmentspending. According to data from the NSCB, while GDP growth slowed to 1.1% in 2009 due in largepart to the global financial crisis, it grew at a robust 7.6% in 2010 and by 3.9% in 2011. Thisgenerally upward trend has continued in 2012, with GDP growth of 6.4% being registered in the firstthree months of 2012 resulting from increased Government spending, robust private consumption andgrowing exports.

The Company believes it is well positioned to benefit from the expected economic growth of thePhilippines in both the industrial and consumer sectors. The Company plans to meet the increaseddemand through a number of strategies, including increased capital expenditures for plant expansion,research and development to create new product lines and improve production processes, andincreased marketing campaigns to bring attention to the Company’s various products such as

attendance of technical marketing trade shows.

Economic growth will also drive demand for energy, which the Company believes will result inincreased sales of biodiesel, a major product of Chemrez. The Philippine government’s policy ofencouraging “green” energy and energy independence should also contribute to increased demand forbiodiesel from Chemrez.

Continue to improve business and production processes

The Company intends to improve the efficiency of its management and production processes bymaintaining a flat management structure, an integrated, centralized research and developmentplatform and committing sufficient capital to equipment upgrades and related training. The Company

will ensure that senior management is apprised of trends in the Company’s various industries andworks with production teams to adopt the newest technologies to maintain a competitive advantage aswell as enhance the Company’s reputation as a market leader. The Company intends to periodicallyreassess its management techniques and production processes for areas of improvement, as well ascontinually seek more cost-effective sources of raw materials and more efficient operating andproduction models. The Company will devote research and development resources to maximize theproduction value of newly adopted equipment and make incremental improvements to suchequipment. Adequate resources will be devoted to training production staff and marketing staff.

Pursue international expansion opportunities

The Company intends to continue to expand sales in its various industries to the international market

by expanding sales to current customers that use the Company’s products in the Philippines to includethe affiliates and operations of such companies in foreign markets. The Company also intends toincrease its visibility internationally through the increased use of agents and by participating inindustry exhibitions abroad and entering into strategic alliances with established manufacturers andmarketers in select foreign markets.

In 2006 the Company established D&L Polymers & Colors, Inc. (“DLPC”) specifically to increaseinternational sales for its colorants, engineered polymers and additives products. Foreign sales as apercentage of total sales for the Company’s colorants and plastic additives business increased from38% in 2009 to 49% in 2011 and the Company expects foreign sales to be a significant driver forfuture growth in this business segment. The Company intends to use the international network DLPChas built to possibly expand the Company’s other businesses as well.


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RISKS OF INVESTING

Before making an investment decision, investors should carefully consider the risks associated withan investment in the Shares. These risks include:

• Risks relating to the Company and its businesses;

• Risks relating to the Philippines;

• Risks relating to the Offer and the Shares; and

• Risks relating to certain statistical information in this Prospectus.

CORPORATE INFORMATION

The Company is a Philippine corporation with its registered office and principal executive officeslocated at #65 Industria Street, Bagumbayan, Quezon City 1110, Philippines. The Company’s

telephone number is +63-(2) 635-0680 and its fax number is +63-(2) 635-0696. Its corporate websiteis www.dnl.com.ph. The information on the Company’s website is not incorporated by reference into,and does not constitute part of, this Prospectus.


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Issuer ....................................................... D&L Industries, Inc., a corporation organized underPhilippine law. The trading symbol shall be “DNL”.

Selling Shareholder .................................. Jadel Holdings Co., Inc.

International Underwriter ......................... Maybank Kim Eng Securities Pte Ltd

Domestic Lead Underwriter ...................... Maybank ATR Kim Eng Capital Partners, Inc.

The Offer ................................................. Offer of 1,071,429,000 Firm Shares to be issued andoffered by the Company and up to 160,714,000 OptionalShares.

Institutional Offer ..................................... 750,000,300 Offer Shares are being offered and soldoutside the United States in offshore transactions inreliance on Regulation S.

PSE and LSI Offer .................................... 321,428,700 Shares are being offered in the PSE andLSI Offer in the Philippines at the Offer Price. Out ofthe PSE and LSI Offer, 214,285,800 Shares are beingallocated to all of the PSE Trading Participants at theOffer Price and 107,142,900 Shares being allocated atthe Offer Price to LSIs. Each PSE Trading Participantshall initially be allocated 1,611,000 Offer Shares andsubject to reallocation as may be determined by the PSE.

Based on the initial allocation for each tradingparticipant 1,611,000 Offer Shares, there will be a totalof 22,800 residual Offer Shares to be allocated as maybe determined by the PSE. Each LSI applicant maysubscribe up to a maximum of 5,000 Offer Shares at theOffer Price. PSE and LSI Offer Shares not taken up bythe PSE Trading Participants and the LSIs shall bedistributed by the Domestic Lead Underwriter to itsrespective clients or to the general public. PSE and LSIOffer Shares not taken up by the PSE TradingParticipants, the Domestic Lead Underwriter’s clients orthe general public shall be purchased by the Domestic

Lead Underwriter.

Eligible Investors ..................................... The PSE and LSI Offer Shares may be purchased by anynatural person of legal age residing in the Philippinesregardless of nationality, or any corporation, association,partnership, trust account, fund or entity residing in andorganized under the laws of the Philippines and/orlicensed to do business in the Philippines, regardless ofnationality, subject to our right to reject an Applicationor reduce the number of our Firm Shares applied forsubscription.


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The Institutional Offer Shares are initially being offeredand sold to persons outside the United States in relianceon Regulation S. Subscription to, and purchase of, theFirm Shares in certain jurisdictions may be restricted bylaw. Foreign investors interested in subscribing orpurchasing the Firm Shares should inform themselves ofthe applicable legal requirements under the laws andregulations of the countries of their nationality,residence or domicile, and as to any relevant tax orforeign exchange control laws and regulations affecting them personally. Foreign investors, both corporate andindividual, warrant that their purchase of the FirmShares will not violate the laws of their jurisdiction andthat they are allowed to acquire, purchase and hold theFirm Shares.

Offer Price ............................................... P4.30 per Offer Share. The Offer Price was determined

based on a book-building process and discussionsbetween the Company, the International Underwriterand the Domestic Lead Underwriter.

Over-Allotment Option ............................. The Selling Shareholder has granted the StabilizingAgent an option, exercisable in whole or in part, topurchase up to 160,714,000 Optional Shares at the OfferPrice, on the same terms and conditions as the FirmShares as set out in this Prospectus, solely to cover over-allotments, if any. The Over-Allotment Option isexercisable from and including 30 days after the ListingDate. See “Plan of Distribution—The Over-Allotment

Option.”

Transfer Restrictions ................................ The Institutional Offer Shares are initially being offeredand sold outside the United States in offshoretransactions in reliance on Regulation S. See “Plan ofDistribution—The Institutional Offer.”

Use of Proceeds ........................................ See “Use of Proceeds” for details of how the total netproceeds are expected to be applied.

Minimum Subscription ............................. Each application must be for a minimum of 1,000 Firm

Shares, and thereafter, in multiples of 1,000 FirmShares. Applications for multiples of any other numberof Shares may be rejected or adjusted to conform to therequired multiple, at the Company’s discretion.

Reallocation ............................................. The allocation of the Firm Shares between the PSEand LSI Offer and the Institutional Offer is subject toadjustment. In the event of an under-application in theInstitutional Offer and a corresponding over-application in the PSE and LSI Offer, Firm Shares inthe Institutional Offer may be reallocated to the PSEand LSI Offer. If there is an under-application in the

PSE and LSI Offer and if there is a correspondingover-application in the Institutional Offer, Firm Shares


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in the PSE and LSI Offer may be reallocated to theInstitutional Offer. The reallocation shall not apply inthe event of over-application in both the PSE and LSIOffer and the Institutional Offer.

Lock-up .................................................... The PSE rules require an applicant company to cause itsexisting shareholders owning at least 10% of theoutstanding shares of the Company not to sell, assign orin any manner dispose of their shares for a period of 180days after the listing of the shares. A total of273,900,000 Shares held by Jadel Holdings Co., Inc.,will be subject to such 180 day lock-up. See “Plan ofDistribution—Lock-Up.”

In addition, if there is any issuance of shares orsecurities such as private placements, assets for sharesswap or a similar transaction or instruments which lead

to issuance of shares or securities such as convertiblebonds, warrants or a similar instrument that arecompleted within 180 days prior to the start of the offerperiod, and the transaction price is lower than the OfferPrice in the initial public offering, all such shares orsecurities shall be subject to a lock-up period of at least365 days from full payment of such shares or securities.To implement this lock-up requirement, the PSErequires the applicant company to lodge the shares withthe PDTC through a Philippine Central Depository(“PCD”) participant for the electronic lock-up of theshares or enter into an escrow agreement with the trust

department or custodian unit of an independent andreputable financial institution. A total of 2,178,799,995Shares, held by Dean L. Lao, Leon L. Lao, Alex L. Lao,Yin Yong L. Lao, John L. Lao, LBL Industries, Inc.,Jadel Holdings Co., Inc., SmartWorks Trading Co. Inc.,Allvee United, Inc., Jadana Inc., CEE Industries Inc.,Prime Spin Inc., Filemon T. Berba, Jr. and Cesar B.Bautista, will be subject to such 365 day lock-up. See“Plan of Distribution—Lock-Up.”

In addition to the lock-up obligations required by thePSE, each of the Company, the Selling Shareholder,Dean L. Lao, Leon L. Lao, Alex L. Lao, Yin Yong L.Lao, John L. Lao and LBL Industries, Inc. has agreedwith the International Underwriter and the DomesticLead Underwriter that, other than in connection with theOver-Allotment Option and the issuance of stockdividends, for a period of 180 days after the ListingDate, none of the Company, the Selling Shareholder,Dean L. Lao, Leon L. Lao, Alex L. Lao, Yin Yong L.Lao, John L. Lao and LBL Industries, Inc. nor anyperson acting on their behalf will, without the priorwritten consent of the International Underwriter and the

Domestic Lead Underwriter, issue, offer, sell, contract tosell, pledge or otherwise dispose of (or publicly


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announce any such issuance, offer, sale or disposal of)any Shares or securities convertible or exchangeable intoor exercisable for Shares or warrants or other rights topurchase Shares or any security or financial productwhose value is determined directly or indirectly byreference to the price of the Shares, including equityswaps, forward sales and options.

Listing and Trading .................................. The Offer Shares are expected to be listed on the PSEunder the symbol “DNL”. See “Des

dl industries - domestic offering circular - nov. 26 2012_2

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