SMC buys 35% stake in P15-billion tollway project

MANILA, Philippines - San Miguel Corp. (SMC) said yesterday that it has signed a deal to take a 35-percent stake in Private Infra Development Corp. (PIDC), a private sector consortium that owns the right to develop a P15-billion tollway project that runs from Tarlac to Pangasinan and then to La Union.

In a disclosure to the Philippine Stock Exchange, SMC said the subscription agreement, signed by subsidiary Rapid Thoroughfares Inc., is in line with the conglomerate’s strategy to diversify from its core brewing business.

“The agreement is the most recent step in SMC’s strategic transformation to diversify from its core food, beverage and packaging portfolio and marks its entry into infrastructure and tollways,” SMC said.

SMC didn’t say how much it was investing in PIDC but sources said the country’s largest private employer could shell out between P1 billion and P1.5 billion for the project.

The 88.5-kilometer tollroad project will extend from La Paz, Tarlac to Rosario, La Union, providing a seamless land link between Manila and Northern Philippines. Once completed, it is estimated that the expresswaywill cut by half the travel time from Manila to Baguio.

The North to Central Luzon stretch is seen as a potential dynamic industrial corridor that will make it easier and more cost effective to move goods and people from one point of Luzon to another.

The three-phase project, which is being undertaken via a build-operate-transfer (BOT) contract between the Department of Public Works and Highways (DPWH) and PIDC, is targeted for completion in 2013, with the first two sections expected to be finished by May 2010 and January 2011, respectively.

The estimated project cost of P15.36 billion includes a P2.9-billion subsidy from the government for certain portions of the expressway. It will initially have two lanes, but two more will be added once the traffic volume reaches 25,000 vehicles a day.

DMCI Holdings president Isidro Consunji earlier said San Miguel was eyeing a 49 percent stake in PIDC with an option to increase its holdings to 51 percent. DMCI has 34-percent equity in PIDC.

Aside from DMCI, other PIDC shareholders are First Balfour Inc., which also owns a 34-percent equity, EEI Corp., R.D. Policarpio and Co. Inc., D.M. Wenceslao and Associates Inc., J.V. Angeles Construction, J.E. Manalo and Co. Inc., New Kanlaon Construction Inc. and Rockford Development.

SMC’s diversification moves include the acquisition of a minority stake in power utility giant Manila Electric Co. and an option to buy a majority stake in local oil refiner Petron Corp. It has also recently acquired 32.7 percent interest in Liberty Telecom Holdings Inc. and is now discussing with the stockholders of Extelcom the terms and conditions of a non-binding memorandum of understanding with respect to its possible acquisition of Extelcom shares.

SMC is currently conducting a legal and financial due diligence on Extelcom to determine whether an investment shall be made.

Aside from tollroad and telecommunications, SMC also announced plans to venture into mining and water utilities via the controversial $1.1 billion Laiban Dam project.