San Miguel raises record high P80-B from share sale

MANILA, Philippines – The country’s largest business group raised P80 billion from a share sale deal, the highest in Philippine corporate history.

On Friday, September 28, diversified conglomerate San Miguel Corp. listed P80 billion-worth of Series 2 preferred shares at the Philippine Stock Exchange (PSE). This overtakes Henry Sy-led Banco de Oro’s $1-billion stock rights issuance in July.

San Miguel’s offering was fully subscribed at the issue price of P75 each. It said the listing attracted both retail and institutional investors seeking higher yields in a low-interest environment.

“(The success of the issue was due to the) robustness of the Philippine capital markets and prevailing business optimism, the draw of our company as an attractive investment option, and the coming together of all institutions to create what’s been the game changer for our capital markets,” San Miguel president and chief operating officer (COO) Ramon S. Ang said.

In a statement, San Miguel said the bulk of the proceeds will be used to refinance the company’s outstanding Series 1 preferred and non-voting shares, as well as settle short-term debts. Most of the Series 1 preferreds were issued about 2 years ago to coconut farmer groups disputing the ownership of the coco-levy-related shares in San Miguel. 

San Miguel offered 1.067 billion Series preferred shares that are “peso-denominated, perpetual, cumulative, non-participating and non-voting.”

Below are the 3 sub-series and their respective dividend rates per year:

• 2-A: 7.5%
• 2-B: 7.625%
• 2-C: 8%

SMC has the redemption option starting the 3rd, 5th and 7th year and every dividend payment thereafter. There will be a ‘step-up’ rate effective at the 5th, 7th and 10th year, respectively, if shares are un-redeemed. 

‘Coco levy’ shares

The preferred shares San Miguel refinanced represent the previously contentious stake that coconut farmer groups were claiming in the diversified conglomerate.

Some 14 companies in the Coconut Industry Investment Fund (CIIF) were claiming ownership over more than 750 million common shares in San Miguel, equivalent to a 24% stake, which they said were bought by the conglomerate’s chairman, Eduardo Cojuangco Jr, using funds from a levy imposed on coconut farmers during the Marcos regime.

The Supreme Court allowed San Miguel  to convert the shares into preferred before the 2010 presidential elections.

Farmer groups slammed the conversion of the common into non-voting preferred shares.

Preferred shares pay higher and consistent dividends, but carry no voting rights. Common shares, on the other hand, do not promise consistent yields but entitle holders to vote in company matters such as election of the board of directors and approval of business plans.

San Miguel however said the conversion allowed shareholders doubtful of its expansion into new businesses to minimize their risk by holding shares that pay consistent dividends.

Diversification

San Miguel since 2007 has been aggressively moving away from its traditional food and drinks businesses into heavy and risky sectors such as energy, telecoms, mining, banking and infrastructure, and airlines.

“Ever since we embarked on our diversification strategy in 2007, our goal has been to make a deep and lasting positive impact on the Philippine economy through our businesses. San Miguel can play a pivotal role in hastening our country’s growth,” Ang said.

“The fast-changing industries that we have chosen to participate in are challenging, but they also provide us the greatest opportunities to stay ahead of the curve, grow even further and make a difference,” he added.

Top Frontier is now the single biggest voting block in San Miguel, with over 40% stake.

The two companies have interlocking ownership. Top Frontier is owned by San Miguel itself as represented by Ang, and by an investor group that includes Ongpin, his nephew Eric Recto and businessmen Iñigo Zobel and Joselito Campos.

The Hong Kong and Shanghai Banking Corporation is the conglomerate’s lead issuer for the September 28 share sale, while joint book runners include Union Bank, BDO Capital, China Bank, RCBC Capital, First Metro Investment, ING, PCCI, SB Capital, Standard Chartered Bank and UCPB.

Participating underwriters were Insular Investment Corporation and PNB Capital and while the selling agents are Bank of Commerce and the trading participants of the PSE. – Rappler.com