The public float rule and fate of San Miguel units, Kirin

MANILA, Philippines – Ramon Ang, the president of conglomerate San Miguel Corp, is not keen on giving up control of listed unit San Miguel Brewery to its business partner, Japanese firm Kirin Holdings, to meet the requirements of the local stock exchange.

San Miguel Corp and Kirin have yet to agree who-will-give-up-how-much in the brewery company as the Philippine Stock Exchange’s requirement that listed firms must have at least 10% public investors nears.

The public currently has a paltry 0.6% stake in the country’s largest brewery firm after San Miguel Corp diversified away from its core food and drinks business and into heavy industries.

After a series of deals, San Miguel Corp sold a total of 48% stake in the brewery firm to Kirin, which restructured its Philippine investment from focusing on the parent and owning direct stakes in San Miguel Brewery. The local conglomerate then reduced its stake to 51%, still retaining control.

“We can agree to sell down together…If not, we will go for delisting,” Ang said.

Both groups are set to meet in June to iron out the details. They are evaluating several proposals, including the issuance of preferred shares.

Public float

This thorny issue of having to loosen a controlling group’s grip on a listed firm becomes more pronounced as the deadline to meet the required free float level — or face suspension starting next year and eventual delisting from the exchange — looms.  
 
The San Miguel group is one of the most prominent since trades for its parent firm and Petron Corp, its oil refinery and retailing unit, account for a tenth of the trades in the exchange.  

Parent firm San Miguel Corp has already increased its public float to 24% in 2011, while Petron’s employee retirement unit sold its shares in the country’s biggest oil refiner and retailer in February to increase outsiders’ stake to 14.68% from previous 7.5%.

The public ownership base of members of the San Miguel group are at these levels

• San Miguel Corp – 24% publicly held
• Petron Corp – 14.68%%
• San Miguel Brewery Inc. – 0.6%
• Ginebra San Miguel, Inc. – 21%
• San Miguel Purefoods Co. Inc. 0.1%
• San Miguel Properties Inc. – 0.1%.

Delisting and listing

Ang said options for its listed food and properties units are being considered.

He said voluntary delisting of San Miguel Properties Inc. and San Miguel Pure Foods Co. Inc. is on the table, too.

On the other hand, Pure Foods Co. Inc. may conduct a private placement or a secondary sale of of San Miguel Corp’s shares in the food unit to raise its free-float level to anywhere between 10% to 15%.  

“We are in talks to place out the shares,” Ang said.  

Meanwhile, Ang said plans to still proceed with the initial public offering (IPO) of its power unit, SMC Global Power Holdings Inc., remain.

The IPO was initially set for 2011, but was held back due to adverse market conditions.

“If you proceed with the IPO in a bad market, you will end up buying back all the shares,” he said in the vernacular.

SMC Global Power was then supposed to raise up to P36.90 billion via an IPO, a record high. – Rappler.com