The Providential Hand in Sulipicio O. Tagud, Jr.’s Life

“There are settings and institutions led by people whose identities do not depend on depriving others of theirs. If you are in that kind of family or office or school or hospital, your sense of self is enhanced by leaders who know who they are. These leaders possess a gift available available to all who take an inner journey: the knowledge that identity does not depend on the role we play or the power it gives us over others. It depends only on the simple fact that we are children of God, valued in and for ourselves. When a leader is grounded in that knowledge, what happens in the family, the office, the classroom, the hospital [the business] can be life-giving for all concerned.” – Parker J. Palmer, Let Your Life Speak, 2000.

When I met Sulpicio Tagud, Jr. he was rushing to get to his business meeting, yet, he paused. He shook my hands firmly. Ester, his wife and my classmate since elementary to high school, introduced me. I told him that I have heard many good stories about him. “I hope they are all good,” he said. “They are.” He smiled.

The next time I saw him he was on the way to the Sanctuario de San Antonio for Sunday mass. He greeted me with engaging warmth. “Have you had breakfast?” It was close to noon. “Yes, I have, thank you.” As we walked towards the driveway, he held Ester’s hands and helped her inside the car. That gesture towards his wife would be repeated few more times, that of holding her hands and together, walking with ease alongside one another. That intimacy, trust and affection struck me as genuine, as well as our classmates, who teased Ester that their oozing sweetness was enviable, even after 4 decades of marriage.

At lunch, I joined their family at Hotel Dusit Thani over Thai food. Mr. Tagud ordered for all, but consulted his wife and sons, Stephen and Chin Chin, for their choices too. When the food arrived, he waited until we all have gotten our fill, and near the end of the meal, he reached out for what he wanted.

His selflessness reminded me of Assemblyman Rob Bonta, where at a Los Angeles fundraiser, the legislator stopped at each table to check to ensure each guest had their meals, before he even sat down for his own.

To me, the gestures of these two men in power reveal who they are: other-focused, caring and service-oriented.

2Go Travel—an Oasis for Seafarers under Mr. Tagud’s Leadership
James Loyola of Manila Bulletin on April 10, 2017, reported: “There is a changing of the guards at listed integrated transport solutions provider 2GO Group, Inc. as the SM and Udenna groups took over control of the company from former chief executive Sulficio O. Tagud, Jr. In a disclosure to the Philippine Stock Exchange, the firm said businessman Dennis A. Uy has been named the new president and chief executive officer (CEO). Uy is the chairman of Udenna Corporation, the parent of Phoenix Petroleum Philippines, Inc. and Chelsea Logistics Corp. Tagud has retired both from the management and the board of the company after having tried to block the entry of Udenna as shareholder and Uy as board member.”

2Go Travel has modernized transport by sea. Under Mr. Tagud’s leadership, 2Go Travel elbowed out its competition and became attractive for purchase: “The SM group acquired 34.5 percent of Negros Navigation Co., the parent company of 2Go, for $124.5 million from Chinese shareholders while Udenna acquired its Nenaco shares from its Kuwaiti shareholders,” Manila Bulletin’s James Loyola wrote,“We thank Mr. Tagud for his contributions in making 2GO resilient and more stable than ever. We hope to continue guiding it to further growth and sustainability,” said Uy.

Mr. Tagud granted an exclusive interview with this writer in May 2017. I asked him about the process of creating an industry standard, an integrated transport solutions, 2Go Travel, which included a fleet of ships that transported passengers and cargo from Manila to Bacolod, Iloilo, Dumaguete, Butuan City, Iligan, Dipolog, Cagayan de Oro, Zamboanga, Ozamis, Puerto Princesa and Coron.

“How did you create this industry standard, I asked?” “By taking over an almost bankrupt Negros Navigation (NN). It was established in 1932 before the war. During 1997, the Asian financial crisis, it hit some countries 3 years, while the impact to the Philippines lasted 5 to 6 years. In 1995, the company borrowed to buy vessels, but because of the Asia-wide slow down and less people travelling by sea, the lower income group was the worst hit. There was little income and folks did not travel often, there was cutbacks those years. It now got transferred to Metro Pacific Group (MPG) holding company which includes communications (PLDT, SMART, etc.) hospitals, toll roads, infrastructure, Maynilad water utilities and majority of Meralco. MPG brought in expatriates as consultants hoping for a turnaround, until the company filed to be under a corporate receiver, something similar to Chapter 11 bankruptcy, a reorganization of debts. One month into the job, even after retrenchment, NN still had 1,000 employees dependent on separation pay, paid in installments,” Tagud shared.

Most of the employees who were let go still had not found jobs. He was faced with a dilemma, “Even if I liquidate and collect my fee as corporate receiver, what happens to the 5,000 mouths (assuming 5 in a family) depending on the company for support?”

Tagud decided if he rehabilitates the company, and with the same 1,000 jobs retained, then, 5,000 families will continue to thrive.

While it may have been easiest to liquidate, his heart continued to say, “save the jobs from being lost. Do this as your social work. To push it back as far as I go.”

In understanding providential order, one must know how to live according to nature which is living according to reason. That means living in full appreciation of the interlocking design, that God provides for all human beings.

It also meant according to Charles Taylor, an author, “more fully, it generally meant finding one’s highest satisfaction in furthering the design itself…the good life requires that in carrying out the activities which have been marked as significant, one espouse the spirit of whatever has so marked them. Humans are called to a broader perspective, to embrace the whole. What was charity now merges into benevolence.”

He went to Manny Pangilinan, the head of Metro Pacific Group (MPG) who understood what must be done. Mr. Pangilinan asked him to locate a buyer for NN. At that time, Mr. Tagud had fixed up most problems: reduce losses, addressed the large debt issues and managed relationships with creditors. NN had started to turn around, and now has positive business value. Five companies had looked at NN, some from Indonesia and Malaysia. But, after due diligence, they pulled back and said, “No interest.”

At this time, MPG was entering into another foreign venture partnership and was in the process of buying another business, but NN was pulling down the balance sheet because of its current business value.

So, Tagud boldly made an assertion, “Why don’t you sell the business to me?” The asking price of NN at that time was Php 150 million.

Mr. Tagud offered what he had, Php 5 million, eliciting a laugh from MPG. MPG reconsidered. Mr. Tagud acquired 85% of NN for Php 5 million, with 15% to MPG, in case the rehabilitation of NN succeeds.

But first, “I had to convince my wife, Ester, to put her faith in me, to invest our “blood money, our retirement money” before the executed sales documents were done,” Mr. Tagud said.

“Where did your confidence come from,” I asked?

“I started to work with another company before, a big real estate company which I ran for 5 years so it could recover and it did recover,” he said, “ I had solid experience handling distressed companies, 4 distressed companies have now been helped. So, it did not faze me. But for Php 5 million cash I handed over, I was acquiring Php 3 billion loans and a potential equity, not yet realized, for Php 4.2 billion if managed right. If all else failed, what else is new, the business I was buying was a failure anyway. So there can only be one direction, to succeed.”

“So here I am now,” he said, “I am handing over Php 5 million to MPG, who is now going to pay the transfer tax, Php 9 million to the Bureau of Internal Revenue?” MPG paid the transfer taxes to complete the transfer of ownership from MPG to Tagud in Dec. 2006.

In the first quarter of 2007, the 2 years of earlier hard work paid off and NN was posting positive gains. By then, NN was owned by 2,000 shareholders. MPG asked why is it making money under Tagud’s ledership, to which, Tagud replied, “Boss, you could just not wait.”

By 2008, NN had increasing profitability and was looking to increase revenue to upgrade its vessels. Tagud was introduced to a Kuwaiti private equity fund group. They had lunch that Friday and the group was scheduled to leave the next day. They reconvened and and made a presentation to them Saturday morning.

The presentation was comprehensive, including a revenue and liabilities analysis, particular to each of the 9 ships NN had at that time, “When you ran the business, you look at the performance of each ship, it is like owning 9 different stores, we cannot aggregate them. Of the 9 ships, I assigned a senior officer as business manager of the ship. They all accepted the challenge and there was a healthy competition amongst the senior officers.”

Months passed, and the Kuwaiti group invested in NN. With their investments, the Php 2.5 billion debts were paid off. But, first, Tagud negotiated for the loans to be repaid at Php 33 cents for every peso in debt. That zeroed out the debts of NN and left them enough money to modernize some of the ships. After that, and with operations turning in more profits, NN also alloted Php 250 million to buy back the 15% interest of MPG. Instead, MPG took Php 150 million for its 15% interest in NN and gave back to Tagud the Php 100 million in Sept./Oct. 2008.

By Sept. 2010, an old acquaintance told Tagud about another company being sold, the Aboitiz Transport group with five times bigger assets than NN. This is not the case of a bigger company buying a smaller company, instead this is the ‘smaller David’ company buying up a ‘bigger Goliath’ company. “Perhaps it is the Quijote complex in me,“ Tagud continued. Tagud approached a Chinese Equity Fund and made them choose whether to invest in NN or the Aboitiz company. The Fund preferred the management of NN and invested in the smaller company. So, the deal was made, a smaller NN acquired a five times bigger in assets, Aboitiz. The integration of both companies led to the rebranding of the merged entities into 2Go Travel.

A successful acquisition requires managing people well
From the get go, Tagud told his management group, “We are not coming in as a conquering army. We are to integrate – it is to pick up the good things from the other entity and to be nice to them. The general default attitude is resistance and feeling superior to them. Don’t assert that you are superior to them. Decide overall to retain competence in the organization. It is not to behave like buyers, we are the boss attitude. It took two years to integrate the two companies under a new corporate vehicle 2GO GROUP, INC which then embarked on expanding its business from shipping to full scale end-to-end logistics.

Tagud shared some more, “Revenues increased, profitability increased and we became the darling of foreign investors. In considering investing in logistics business in the Philippines, 2Go Group came up #1. My son, Stephen is responsible for rebranding. After the acquisition, it is not as important to be the biggest shipping company. But what is more important, because we are islands, is that shipping becomes the biggest enabler of an integrated logistics operations. If we consider logistics, end to end from factory to store shelves, our shipping company became a convenient platform. If goods need to be in Cebu in 36 hours, it will be there in 36 hours. We became a warehouse, land transport, sea transport, and distribution  company. It was a seamless connection of all segments. 2Go Group, Inc. had the ability to deliver end to end anywhere in the Philippines. Last year, both the Chinese fund and the Kuwaiti fund were happy to achieve 20% return on their investments at 2GO. SM beat me to acquiring the shares of these partners, even if I built it. SM’s acquisition and introduction of another group, will now mean clash of cultures and their management style is different than mine so, I sold my shares.”

To Tagud, “the greatest happiness is when you give something and  see someone smiling and may even thank you.”

To his management group, 60% of the sales went to Tagud, and 40% to 11 managers, “I have made all of them millionaires,” he said. All of his NN employees also got 2 months pay also from the proceeds of his personal holdings.

Part II on love, marriage, faith and family success which will be in the next issue.

Prosy Abarquez-Delacruz, J.D.
Prosy Abarquez-Delacruz, J.D.

Prosy Abarquez-Delacruz, J.D. writes a weekly column for Asian Journal, called “Rhizomes.” She has been writing for AJ Press for 10 years. She also contributes to Balikbayan Magazine. Her training and experiences are in science, food technology, law and community volunteerism for 4 decades. She holds a B.S. degree from the University of the Philippines, a law degree from Whittier College School of Law in California and a certificate on 21st Century Leadership from Harvard’s Kennedy School of Government. She has been a participant in NVM Writing Workshops taught by Prof. Peter Bacho for 4 years and Prof. Russell Leong. She has travelled to France, Holland, Belgium, Japan, Costa Rica, Mexico and over 22 national parks in the US, in her pursuit of love for nature and the arts.

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