Sy buys 6.2% interest in SMC for P9.6 billion

Retail tycoon Henry Sy bought a sizeable block of shares in San Miguel Corp. (SMC) yesterday for a whopping P9.625 billion, equivalent to a 6.2-percent interest in the country’s largest food and beverage conglomerate.

According to Sy, chairman of SM Investments Corp., "SMC is an excellent company, with a proven track record of achievements. We are pleased to have made this acquisition and are confident that it is a good investment for us."

Sources said the purchase would enable Sy to get one board seat in SMC.

The purchase was made through SM Investments, which earlier bought shares in ABS-CBN Broadcasting Corp. equivalent to two board seats but which sold them later on.

SM Investments, in a statement, said it has acquired 175 million class A common shares in SMC, representing approximately 6.2 percent of the outstanding share capital of SMC, from the holdings of the San Miguel Employees Retirement Plan.

The shares were transacted at a price of P55 per share, representing a 10 percent premium to the market price as San Miguel A shares, which are open only to local investors, closed at P50 yesterday, up 50 centavos from Thursday’s level.

According to SM Investments, it acquired a shareholding in SMC to broaden its portfolio of investments in the Philippines.

A source close to Sy explained that as far as they are concerned, SMC is a good investment, considering its bright prospects. "For SM Investments, SMC is a good buy," the source emphasized.

With over P121 billion in sales for 2001, SMC has established itself as the undisputed leader in the country’s food and beverage industry, especially with its recent acquisition of Purefoods Corp. from the Ayalas, Cosmos Bottling Corp. from the RFM Group of Companies, and Coca Cola Bottlers Phils. Inc.

According to SM Investments, SMC is the largest listed food and beverage company and one of the largest companies in the Philippines with leading market shares in various business segments.

During the first seven months of the year, SMC increased its sales revenues by more than 25 percent compared to the same period last year on account of improved consumer spending.

Company officials explained that aside from better improved consumer spending, SMC’s efforts to grow volumes, maximize operational efficiencies, and optimize resources after acquiring several value-enhancing businesses, including Coca-Cola, Cosmos, and Pure Foods Corp. are contributing heavily to improving the company’s bottomline.

With these businesses coming under its fold, SMC has focused on the implementation of various integration programs to realign operations, distribution, processes and systems. Part of the realignment included the consolidation of all non-alcoholic products under Coca-Cola Bottlers Phils. Inc.’s (CCBPI) umbrella and the merging of Purefoods and SMC’s food operations into San Miguel Pure Foods Company.

Officials said the resulting structure in both these segments better enabled SMC to deliver a full range of products to the consumers.

For its part, SMC’s hard liquor subsidiary La Tondena Distillers Inc. further refined its value proposition by focusing on its core business and a potentially profitable export market.

They also explained that the integration of the acquisitions and synergies derived from the realignment enabled SMC to further enhance its position in the processed meats, softdrinks, and non-carbonated beverage markets.

For the second quarter of the year, consumer spending rose 3.8 percent compared to 3.3 percent a year ago and 3.4 percent during the first quarter. The second quarter consumer expenditure figure accounts for over 70 percent of gross domestic product (GDP) which in the first semester climbed 4.1 percent following a second quarter GDP growth of 4.5 percent on the sustained strength of the services sector and a more upbeat industry sector.

Just recently, foreign stockbrokerage house UBS Warburg pointed out that the gains due to the fold-in of CCBPI were already evident during the second quarter as the soft drink firm registered strong unit sales and earnings before interest and taxes (EBIT) margins compared to the same period over the last three years.

In the first half of 2002, SMC’s sales jumped by 25 percent to P66.1 billion although bottom line earnings of P3.01 billion were still lower by 20 percent compared to the same period in 2002 due to additional costs related to the group-wide integration.

By the end of 2002, the company is projected to register banner net earnings of P6.9 to P7.79 billion, as against P6.47 billion in 2001.

Abacus Securities, in another report, said SMC remains quite attractive given the gains still to be reaped from the integration of Coke, Cosmos, and Pure Foods.

Meanwhile, the sale of the SMC shares were equally distributed to the 138 active brokers, entitling them to 1.258992 million shares each with a uniform commission rate of 0.0015 percent.

In previous block sales, only affiliated stock brokerage houses or foreign brokers usually corner the bulk of the block sale, such as BPI Securities in the BPI-FEBTC and UCPB Securities in SMC transactions. – with Conrado Diaz Jr.