San Miguel Corp agreed to a takeover offer from a company controlled by its directors that values the largest Philippine food and beverage maker at 171.7 billion pesos ($3.75 billion). The company’s shares surged.
Top Frontier Holdings Inc, part-owned by former Trade Minister Roberto Ongpin and Inigo Zobel, a member of one of the country’s richest families, plans to offer 75 pesos for each share in the foodmaker, San Miguel said yesterday. Top Frontier will need 107.4 billion pesos to buy the rest of San Miguel at that price, based on Bloomberg calculations.
The offer will be triggered in March when Top Frontier, which owns 26 per cent of San Miguel, completes the purchase of a stake held by Q-Tech Alliance Holdings Inc, San Miguel said. The deal’s completion will give Ongpin and Zobel’s Top Frontier control over a company expanding into faster-growing industries such as energy and telecommunications and with more than $3.3 billion in cash as of June. Ongpin is also part owner of Q-Tech.
“San Miguel is layering its ownership and it’s probably to guard against the entry of other interests while it’s rationalizing the businesses it got into,” Olan Caperina, who helps manage $9.7 billion at Bank of the Philippine Islands, said today. “These changes in ownership can help San Miguel pursue its diversification strategy and organize the different ventures it has gotten into.”
San Miguel’s A shares rose 7.5 per cent to close at 72 pesos, the biggest jump in 10 months. That boosted their advance in the past year to 73 per cent, compared with a 54 percent increase in the local benchmark index. Its B shares, which foreigners can buy, also climbed 7.5 per cent to 72 pesos, the highest since July 2007. A total of 1.07 million San Miguel shares changed hands, more than four times the six-month daily average.
“The market senses there’s money to be made,” said Rico Gomez, who helps manage $1 billion at Manila-based Rizal Commercial Banking Corp. “Where can you get this kind of yield in a period of two months? With a firm tender offer, you can’t go wrong buying the shares.”
As part of the plan, San Miguel will also buy a 49 per cent stake in Top Frontier, the beermaker said in its statement sent by e-mail. Top Frontier holds 857.1 million San Miguel shares, worth 61.7 billion pesos based on today’s price.
“San Miguel seems to be funding its own takeover,” said Jonathan Ravelas, market strategist at Banco de Oro Unibank Inc in Manila. “The consolidation of San Miguel shares under Top Frontier will lessen the influence of the government in San Miguel,” Ravelas said.
The Philippine government still controls a stake in San Miguel, which started as a brewer in 1890 when the Philippines was still a colony of Spain.
The Supreme Court has yet to decide on an appeal by a group led by former Senator Jovito Salonga to stop the government from converting that shareholding from common shares into non-voting preferred shares. The government says it holds 24 per cent of common stock in San Miguel, which would be equivalent to 17 per cent of all shares, including preferred stock, according to Bloomberg calculations.
Ownership of another block of shares is still in dispute, even as Chairman Eduardo Cojuangco has been allowed to exercise their votes. The Supreme Court also hasn’t decided on an appeal to overturn the anti-graft court’s decision to dismiss the claim to the stake by the government, which says the holding is equivalent to 20 per cent of San Miguel’s common stock.
Both blocks were seized in 1986 by the government of Corazon Aquino, who deposed dictator Ferdinand Marcos, on allegations they were acquired using public funds managed by Cojuangco, who says he used his own money.
Top Frontier bought 28 per cent of Manila-based San Miguel from the company’s retirement fund in November for 64.3 billion pesos or 75 pesos a share. Q-Tech earlier last year agreed to purchase Kirin Holdings Co’s 20 percent stake for 39.61 billion pesos.
Ongpin and closely held Master Year Ltd own 20 per cent of Top Frontier while Zobel and businessman Joselito Campos each hold 40 per cent, according to the company in November.
Q-Tech’s investors include Mirzan Mahathir, chairman of Crescent Capital Bhd and a son of former Malaysian Prime Minister Mahathir Mohamad.
Top Frontier “will execute an agreement” to buy 327 million common shares of San Miguel held by Q-Tech. It will also have the option to buy a further 302 million shares from Q-Tech and rights over various mining assets, San Miguel said in the statement. Q-Tech currently owns 19 per cent of San Miguel.
San Miguel said its board approved the investment based on Top Frontier agreeing to sell its San Miguel shares in a “orderly” manner to broaden the company’s shareholder base.
