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[ANALYSIS] Holcim’s tender offer: Woes of small investors continue

Den Somera

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[ANALYSIS] Holcim’s tender offer: Woes of small investors continue
The best interest of small investors must come first. What's happening is not of their own doing; they're much like the hapless victims of circumstances.

Holderfin B.V., the majority owner of listed cement company Holcim Philippines, Inc. (trading symbol, HLCM), was ordered by the Securities and Exchange Commission (SEC) to conduct a second tender offer to the remaining shares still held by minority shareholders up to October 30, 2023, following the expiration of its first tender offer on August 30, 2023.  

The effectivity of the order was within 20 calendar days from the receipt of said order, which was last September 28, 2023.

While the SEC’s order for a second tender offer was purportedly in response to public clamor as in to give those minority shareholders selling their shares more time to complete the required documents to submit or give those still undecided more time to decide whether they will remain invested or not in the company, the order is still short from giving the actual remedy small investors should have in connection with the tender offer or for this matter, in any tender offer with the same circumstances as HLCM.

The stance of the Philippine Stock Exchange (PSE) in standing pat on its established practice under its “Consolidated Listing and Disclosure Rules,” is not helping as well in creating the practical fix to ease alleviate the plight of small investors.  

And while the company, in an act of good will this time around, hired Isla Lipana & Co. to assist minority shareholders in securing the Certificate Authorizing Registration (CAR) from the BIR, the terms and conditions of the second tender offer remain basically the same as the first.

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To start with, HLCM was originally incorporated on November 12, 1964 as Hi-Cement Corporation (HCC), according to the PSE website. In 2000, it entered into a merger with Davao Union Cement Corporation and Bacnotan Cement Corporation and became the surviving entity.  At this instance, it also changed its corporate name into Union Cement Corporation. 

Three years after acquiring Alsons Cement Corporation on November 12, 2002, it changed corporate name, again.  This time, into its present name.

At present, HLCM is one of the biggest cement firms across the country operating four production and related facilities, producing about 10 million metric tons.  

Based on its results of operation for the first semester of this year, HLCM recorded a 26.3% jump in its attributable net income to P834.72 million from P661.05 million a year ago.   

Holderfin B.V., on the other hand, is a major shareholder of HLCM and the main party involved in the tender offer. It’s the Amsterdam-based unit of the Holcim Group, which is also a related party to HLCM’s ultimate parent company, cement giant Lafarge Holcim of Switzerland.

Holderfin B.V. bought the 594.95 million HLCM common shares held by co-shareholder Sumitomo Osaka Cement Co., Ltd. which was equivalent to 9.22% of HLCM’s outstanding capital stock.  The company’s public float, as a consequence, fell to 5.05% and breached the minimum public float requirement of 10%.  The PSE, then, imposed a trading suspension on the shares of HLCM on June 29, 2023.

Tender offer period

Under this situation, Holderfin B.V. decided to pursue voluntary tender offer proceedings for the purpose of delisting HLCM from the PSE.  

The tender offer period was set from July 10 to August 30, 2023 with the offer price pegged at P5.33 apiece.  The target was to acquire the remaining 5.05% of minority shareholdings equivalent to 325.58 million of HLCM’s issued and outstanding common shares with the total amount of Php1.7B.

On September 6, 2023 following the close of the tender offer period, HLCM disclosed that some 233.81million shares or approximately 3.62% of the company’s issued and outstanding common shares were acquired.  

Together with its two affiliates, Union Cement Holdings Corporation (“UCHC”) and Cemco Holdings, Inc., the shareholdings of Holderfin B.V. has reached 6.36 million representing approximately 98.58% of HLCM’s issued and outstanding common shares.

All this time, the trading of HLCM shares in the bourse was suspended, so that the tender offer transactions were all done through the more costly private sale arrangement that involved the tedious registration and approval process from the Bureau of Internal Revenue ((BIR).

The snag and consequent blaming game

Imagine this system: To participate in the exercise, you have to first convert your shares to physical certificates via the upliftment process of converting digital shares into your name. To do so, you have to submit two (2) government-issued IDs and the signature cards bearing the concerned investor. For this, you are charged a processing fee of P167. Once ready, the physical certificates can be delivered via mail or picked up by you at your added expense.

Only then can you tender your shares. To do so, you have to submit to the stock transfer agent the following: 3 copies of the Application to Tender; 3 copies of Deed of Absolute Sale; the endorsed Stock Certificate signed by shareholder; 2 copies of Irrevocable Proxy; Special Power of Attorney; 2 copies of Specimen Signature Card; 2 valid photo and signature bearing IDs; proof of acquisition cost of the tendered shares; and Copy of Tax Identification Number with BIR RDO Code.  If unable to submit the documents personally, you have to submit a “Notarized, Consularized or Apostilled Irrevocable Special Power of Attorney.”

After the tender offer period, the stock transfer agent will disburse the initial payment amounting to 75% of the proceeds of what you have sold through a check. The 25% balance is retained upon the submission of the CAR.

As explained earlier, a CAR serves as proof of tax payment on the shares one has sold, covering both capital gains tax (CGT) and documentary stamp tax (DST). Without it, the BIR will not allow the issuance of a new stock certificate in the buyer’s name.

To obtain the CAR, you must first pay the CGT and DST at the Revenue District Office (RDO) where you are registered. Once these taxes are paid, you can apply for the CAR at the Revenue District Office (RDO) where HLCM is registered.

After obtaining the CAR, you submit it to the stock transfer agent to claim the remaining withheld 25% of the tender offer proceeds. This payment will be made within five (5) calendar days of submission. 

To reiterate, the tender offer of the remaining public float of HLCM cannot be done through the convenient transaction system of the PSE simply because of the trading suspension.  More gravely, the small investors are confronted with the challenging task of going through the cumbersome registration and approval process of securing the CAR from the BIR in order for them to receive the sales proceeds of their tender, on one hand, and by such allow the buyer to have possession of the shares, on the other end.

As the PSE is being accused of not being flexible enough to lift the trading suspension, it is just right for it to say that the management and its major shareholders should have thoroughly considered the repercussions of the share purchase that violated the minimum public float requirement. They should have planned the timing better for that is their responsibility.  

Several publicly listed companies in the past have similarly tendered their shares but had made sure that before executing any action, they did not breach the MPO requirement to avoid a trading suspension on their shares, the PSE added.

As the situation also deprives small investors from enjoying the benefit of paying the lower securities transaction tax (STT) of one fourth of one percent applied to transactions on publicly listed shares, the hands of BIR are tied under present circumstances, namely by “Regulation No. 16-2012 that requires every sale, barter, exchange or other disposition of shares of stock of a publicly listed company which is non-compliant with the MPO to be subject to CGT and DST.” 

On the other hand, many market observers believe that the SEC’s order for a 2nd tranche of the HLCM tender offer was not for the purpose of what it was saying but as a misplaced valiant effort to redeem the failure of existing rules and procedures to cope up with the problem created.  

HLCM is already technically qualified to delist having fully satisfied the delisting rule of 95% (per Memorandum CN No. 2020- 0104, the amended Voluntary Delisting Rules) because Holderfin B.V. has already control of 98.58% of HLCM’s issued and outstanding common shares after the first tender offer. 

Best interest of investing public

The best interest of small investors must come first. The terms and conditions of the tender offer are not exactly favorable especially with the time and effort small investors have to undertake to recover their small investments of Php10,000 or so. The process is time-consuming, costly and burdensome. They cannot be faulted for their uproar. What is happening is not of their own doing, much like the hapless victims of circumstances.   

More importantly, small investors contribute to the development and success of a robust capital market.  As such, they should be accorded the same ease and convenience of investing and protection when recovering their stake with suspended and delisting companies.

I suggest that we legislate once more. The present rules and regulations are products of legislation. The task required does not need reinventing the wheel, so to speak.  Simply make amendments to break the rules that created the vicious cycle of finger-pointing among the involved institutions that continue to mire small investors in the foregoing kind of snag. 

Grant the same less burdensome and less costly transaction system of the PSE for active listed stocks by amending the existing rules and regulations for tender offer exercises of companies whose shares are suspended from trading, especially when seeking delisting. But impose penalties to erring companies for not being diligent enough in maintaining their active listing status. 

To foster true interest in staying listed at the same time beef up the investment climate for the further entry of more key investments, craft additional legislations that adhere to the principle of ease in doing business and tenets of fair play.  

Up to this time, the market continues to be soft and unstable. We must cultivate the power of small investors as partners in building a solid business community and economy. –

The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity. You may reach the writer at  

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