San Miguel Directors May Lead Takeover Bid After Stake Purchase
By Ian Sayson and Francisco Alcuaz Jr, Bloomberg
San Miguel Corp. Directors Inigo Zobel and Roberto Ongpin may lead a takeover offer for the Philippines’ biggest food and beverage maker after paying 64.3 billion pesos ($1.36 billion) for a 28 percent stake.
San Miguel rose to a two-year high in Manila trading after Top Frontier Investment Holdings Inc., 60 percent-owned by the two directors, said it paid 75 pesos a share for stock owned by the foodmaker’s retirement fund. That was 14 percent more than yesterday’s closing price, valuing the company at $3.64 billion.
Closely held Top Frontier said Ongpin, a former trade minister, is in talks to combine its stake with the 20 percent held by Q-Tech Alliance Holdings Inc. to make a general offer for the remaining shares of San Miguel. The 70 percent gain in San Miguel’s A shares this year trails gains of smaller rivals even as the Manila-based company sold some assets, including a stake in a unit to Kirin Holdings Co.
“This transaction and the prospective tender offer will help partially unlock the value of San Miguel,” said Ed Francisco, president of BDO Capital & Investment Corp., a Manila-based investment bank. “The shares have languished for some time.”
San Miguel A shares rose by 5.3 percent, the most in four months, to close at 69 pesos in Manila trading today, the highest level in more than two years. The company’s B shares rose 5 percent to 69 pesos. The A shares are reserved for Filipinos while the B shares have no ownership restrictions.
Asset Sales
San Miguel has raised about 98 billion pesos this year from the sale of assets to finance investments in faster growing industries including energy, mining and telecommunications.
Top Frontier is “banking on the fact that the company is positioned for any economic upturn,” said Fitz Aclan, who helps manage the equivalent of about $9.6 billion at Banco de Oro Unibank Inc. in Manila. “It’s a big company in various sectors. Relative to other stocks in the Philippine market, it’s underperforming. There’s good upside from where it is.”
Ongpin and closely held Master Year Ltd. own 20 percent of Top Frontier while Zobel and businessman Joselito Campos each hold 40 percent, according to Top Frontier’s statement today. The company had last year offered to buy the government’s stake in San Miguel for 56.5 billion pesos, BusinessWorld reported in July 2008.
Mahathir’s Son
“San Miguel is a very sound investment, with a strong balance sheet to support the new business endeavors which are clearly the future engines of growth,” Ongpin said in Top Frontier’s statement.
The investors “will provide added value to the company in terms of strategic positioning,” San Miguel said in a statement.
Manila-based investment company Q-Tech’s investors include Mirzan Mahathir, chairman of Crescent Capital Bhd and a son of former Malaysian Prime Minister Mahathir Mohamad.
Top Frontier’s purchase price values San Miguel at 22 times estimated earnings, according to data compiled by Bloomberg. San Miguel A and B shares are trading at 20 times estimated earnings. Kirin is trading at 22 times estimated earnings.
San Miguel’s investments will have a return on equity that’s almost three times the 7 percent generated by the company’s food and beverage businesses, President Ramon Ang said in July.
Ongpin is in talks for a possible consolidation of the San Miguel holdings of Top Frontier and Q-Tech, according to the statement from Top Frontier. Q-Tech, which earlier this year acquired 20 percent of San Miguel from Kirin, is 30 percent- owned by Ongpin, Top Frontier said.
Ferdinand Marcos
“Subject to the outcome of these discussions with the shareholders of both companies, a tender offer will be undertaken in accordance with law,” Top Frontier said.
Ongpin was the Philippines’ trade minister from 1979 until 1986 while San Miguel Chairman Eduardo Cojuangco was then president of a bank that administered taxes collected from coconut farmers, according to Earl Parreno, a political analyst who wrote a biography on Cojuangco. Ongpin and Cojuangco lost their posts after a popular revolt ousted dictator Ferdinand Marcos.
“I don’t think this is a hostile transaction,” said Winston Garcia, president of the Government Service Insurance System and a San Miguel director since 2001. “Both men are cordial and professional to each other,” he said, referring to Ongpin and Cojuangco.
GSIS sold its 7 percent stake in San Miguel in 2007 and Garcia has been retained as independent director since then.
The government in 1986 seized San Miguel shares owned by Cojuangco and entities representing coconut farmers on allegations these were acquired using public funds managed by the businessman. Cojuangco has denied the allegations and the anti-graft court ruled in his favor in 2007. The Supreme Court is reviewing a request by government to overturn the ruling.
Zobel is a member of one of the country’s richest families. His father sold the family’s stake in San Miguel to Cojuangco in the 1980s.
