SMC's property unit ups capital to P800 million

MANILA, Philippines - The Securities and Exchange Commission (SEC) has approved the increase in the authorized capital stock of Brewery Properties Inc., a unit of diversifying conglomerate San Miguel Corp., from P1 million to P800 million.

San Miguel formed Brewery Properties in 2008 as part of a restructuring program that involved the sale of its beer brands and properties used in its beer operations to subsidiary San Miguel Brewery Inc. (SMBI) for P38.8 billion.

Documents filed with the SEC show that of the P799 million capital increase, P795.5 million has been subscribed and paid for by way of assignment of property and shares of stock.

“The issuance of shares may be considered fair and reasonable since the transfer values were all based on the assessed values of real property per tax declaration assets, while the transfer value of the shares of stock was based on the book value per audited financial statements,” the SEC said.

SMBI said the buyout is a strategic initiative to secure the company’s main competitive advantage, as it needs full control over the brands.

Brand ownership would ensure that margins can be maintained and improved over the long-term as the company would no longer pay royalties to San Miguel.

The acquisition of the lands, on the other hand, would allow SMBI to efficiently expand facilities, increase plant capacities, and improve distribution capabilities to address growing sales volumes.

SMBI is the largest producer of beer in the country with a total market share of over 90 percent. Among its beer brands are the flagship San Miguel Pale Pilsen, Red Horse, San Mig Light, and Gold Eagle.

Formerly a division of San Miguel Corp., SMBI was spun off in October 2007, a move which the parent firm said was intended to realize the value of San Miguel Corp.’s core business.

San Miguel is slowly moving into power, utility, and infrastructure to fuel future growth. It had bought a 27 percent stake in power retailer Manila Electric Co (Meralco) last year and has a pending purchase of a majority stake in oil refiner Petron Corp.

It also acquired an initial stake of 32.7 percent in Liberty Telecommunications Holdings Inc. for P2.2 billion.

San Miguel has also bought a 35 percent stake in Private Infrastructure Development Corp. (PIDC), a consortium of construction companies that will build the Tarlac-Pangasinan-La Union Expressway project.

Just recently, San Miguel won the auction to manage the output of the 620-megawatt Limay combined-cycle power plant in Bataan.