MANILA, Philippines - Diversifying conglomerate San Miguel Corp. is planning to swap as much as 1.1 billion of its common shares, representing 35 percent of its total outstanding capital, for high-yielding preferred shares.
The share swap option is intended to address concerns about the new businesses of San Miguel, which recently invested in oil refiner Petron Corp., power distribution utility giant Manila Electric Co., and Liberty Telecommunications Holdings Inc.
“We are doing this to address concerns from some shareholders about San Miguel’s diversification thrust,” said Ramon S. Ang, president and chief operating officer of San Miguel.
Preferred stocks normally pay higher dividends than common shares. On top of this, preferred shareholders receive their dividends before common shareholders and also have certain advantages if a company liquidates.
“The exchange offer is a proactive approach by San Miguel to engage with existing shareholders who may seek to assume a different risk profile in light of the current global financial crisis and the investments of the company in Meralco and Petron,” said San Miguel’s financial advisors, Citibank and ATR Kim Eng Capital Partners.
While both the issue price and dividend rate of the preferred shares to be offered have yet to be finalized, it is most likely to carry a 30 percent-50 percent premium over current market price of San Miguel common shares.
San Miguel closed at P51 each share last Friday.
The exchange ratio will be one preferred share for every one common share. The preferred shares will not be listed at the stock exchange.
ATR Kim Eng said San Miguel’s preferred shares could offer attractive dividend yields that are three times higher than those of the company’s common shares.
The move is in line with San Miguel’s diversification strategy to further improve its revenue stream.
Unlike common stocks, preferred shares have a higher claim on the assets and earnings of the company. However, they don’t have voting rights.
San Miguel has the option to redeem the preferred shares on the third year of the issue.