SMC spins off P39-billion brewery assets

San Miguel Corp., the biggest food and beverage firm in Southeast Asia, is spinning off about P39-billion worth of brewing assets as it pursues a radical shift into new lines of business.

In a disclosure to the Philippine Stock Exchange yesterday, San Miguel’s corporate information officer Ferdinand Constantino said the company’s board has approved the sale of its domestic beer brands and related intellectual property rights to subsidiary San Miguel Brewery Inc. (SMB) for P32 billion.

He added San Miguel is also selling the lands used in the beer operations partly to SMB Retirement Plan for P239 million and the rest to SMB at a price of P6.8 billion.

Analysts said these transactions may be a prelude to San Miguel’s sale of a 43.25-percent interest in its flagship unit SMB to Japanese brewer Kirin Holdings Co. Ltd., a deal estimated to cost at least P59 billion or $1.26 billion.

While details of the Kirin-San Miguel deal have yet to be fleshed out, both parties are targeting to sign a final agreement by end-February 2009. 

Once consummated, San Miguel’s shareholdings in SMB will go down to 51 percent. The public holds around five or six percent of SMB, which debuted on the stock exchange last year.

Kirin already owns 20 percent of San Miguel, which has been on a recent buying spree after selling some of its units to raise funds for new businesses with high-growth potential.

Last year, it acquired a 27-percent stake in power distributor Manila Electric Co. (Meralco) as well as a controlling stake in oil refiner Petron Corp.

San Miguel also announced plans to bid for the government’s power generating assets as well as explore an alliance with Indonesia’s PT Bumi Resources, which owns the world’s largest thermal coal exporter, Kaltim Prima Coal.

In December 2008, San Miguel formed two new wholly-owned subsidiaries for its holdings in the beer business and beer brands: Brewery Properties Inc. and Iconic Beverages Inc.

ISMB’s beer brands San Miguel Pale Pilsen, Red Horse, San Mig Light and Gold Eagle, are among the top four brands in the country.

It also offers popular brands such as Super Dry, Cerveza Negra, San Mig Strong Ice, Gold Eagle and Cali ,the country’s only malt-based non-alcoholic drink. 

SMB, which contributes around 40 percent of group operating profit, is undertaking new programs to offer wider availability and ensure consumer satisfaction.

San Miguel’s sale of some of its stake in SMB is part of a corporate restructuring program aimed at further improving growth.

The restructuring may require the divestment of part of San

Miguel’s interest in major subsidiaries through either an initial public offering or follow-on offering and strategic partnerships with existing partners and other industry leaders.