Republic Cement bid to acquire firms faces hurdle

The acquisition by Republic Cement Corp. (RCC) of two other cement companies – FR Cement and Lloyd’s Richfield Industrial Corp., from Southeast Asia Cement Holdings Inc. – still has to hurdle a regulatory process that could derail plans to waive the pre-emptive or stock rights offering to the RCC stockholders.

The Philippine Stock Exchange said since the complete terms and conditions of the transaction have not been disclosed by RCC, it (PSE) "cannot make a definitive determination of the applicability of the Rule on Additional Listing of Shares."

Under this rule, the Exchange prohibits the listing of shares subscribed through private placement, debt-to-equity conversion, share-for-share or property-for-share swap, or similar transactions, unless a rights or public offering for the said shares is first undertaken, anticipating the likelihood of significant interest from existing shareholders.

Based on its acquisition plan, which was hatched in November 2001, RCC will assume Seacem’s majority stake in FR Cement and all its interest in LRIC in exchange for a total of some 1.55 billion fully paid common shares of RCC. The transfer will make Seacem a significant stakeholder in RCC with a resulting 26.8 percent of its outstanding capital.

In turn, RCC’s absorption of the two companies will fortify its position as the country’s second largest cement group with a total rated capacity of nearly seven million metric tons clinker output annually. RCC has interests in Fortune Cement Corp., Premier Cement Corp., Iligan Cement Corp. and Mindanao Portland Cement Corp.

But aside from a planned P3-billion capital increase to accommodate the share issue, a major component of the acquisition plan would involve the denial of the pre-emptive rights to RCC stockholders, "considering that it is in exchange for property needed for corporate purposes."

RCC said the waiver of the stock rights would provide the company the flexibility in accessing the capital and financial markets, although this would still be subject to the approval of a two-thirds vote of its stockholders and the Securities and Exchange Commission.