San Miguel gets SEC ok for record-high share sale

MANILA, Philippines (UPDATED) – Diversified conglomerate San Miguel Corp has obtained approval from the Securities and Exchange Commission (SEC) to issue P80.025 billion (US$1.9 billion) worth of preferred shares in what will be the Philippines’ biggest corporate issue.

Documents from the SEC showed San Miguel will offer 1.067 billion Series 2 preferred shares at P75 each to local investors from August 13 until September 14.

Most of the offer proceeds will be used to refinance P72.8 billion preferred shares issued to shareholders, including the government, in 2009.

The offer will be bigger than Henry Sy-led Banco de Oro’s $1-billion stock rights issuance in July.

The preferred shares will be issued after SEC approves the increase in San Miguel’s authorized capital stock, which was approved by San Miguel’s board in April and shareholders in June.

San Miguel seeks to increase its capital stock to P30 billion from P22.5 billion, consisting of 3.79 billion common shares, 1.11 billion Series 1 preferred shares and 1.1 billion Series 2 preferred shares with par value of P5 each.

‘Coco levy’ shares

The preferred shares San Miguel will refinance 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.

After declaring the shares “imbued with public interest,” the Supreme Court awarded the shares to government to be kept in trust, and in a controversial move before the 2010 presidential elections, allowed the government to convert the shares into preferred.

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.

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

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.

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. – Rappler.com