Purefoods eyes P5 billion from private placement

MANILA, Philippines - San Miguel Purefoods Co. Inc. seeks to raise more than P5 billion from the issuance of shares through a private placement to boost its public float and settle payables to its parent firm.

On the sidelines of the company’s annual stockholders meeting yesterday, Purefoods president Francis Alejo said the firm is issuing to San Miguel Corp. and/or third parties up to 75 million new common shares at a price that has yet to be decided by management.

Alejo said the issuance will happen after Purefoods obtains the Securities and Exchange Commission’s approval of the firm’s increase in capital stock from P1.46 billion to P2.46 billion, divided into 246 million common shares with a par value of P10.

He said the issuance of new shares after the completion of the re-launch will result in a shareholding structure where approximately not less than 60 percent of the issued and outstanding capital of Purefoods will be owned by San Miguel.

Shareholders of the company approved the issuance of 18 percent stock dividends at P10 par value, to be taken out of the retained earnings of the company as of end-2009.

Alejo said proceeds from the share issuance will be used to settle payables owed to San Miguel, including the payment for the acquisition by Purefoods of the food-related brands and intellectual property rights amounting to P3.2 billion.

Other proceeds will go to the acquisition of the Vietnam food business through the acquisition by San Miguel Purefoods International Ltd. of San Miguel’s 51 percent interest in San Miguel Purefoods Investment (BVI) Ltd., and for general corporate and working capital requirements.

Alejo said the company continues to hold talks with several foreign investor groups, including US food maker Hormel Foods Corp., for the sale of nearly half of Purefoods.

Hormel owns 40 percent of processed meats firm The Purefoods-Hormel Co, a subsidiary of Purefoods.

San Miguel, Southeast Asia’s largest food and drinks group, said as early as 2008 it wants to sell parts of its major subsidiaries through strategic partnerships or a share offering and retain 51 percent, as it ventures further into heavy industry.

The conglomerate is moving away from its core businesses and into capital-intensive and highly regulated sectors such as oil, power, water and telecommunications to feed future growth

Bucking the tough economic environment, Purefoods reported a 17-fold increase in its net income last year to P2.7 billion from a meager P149 million. Revenues hit a record P75 billion, up six percent from 2008 while income from operations jumped 152 percent to P4.6 billion.

The growth was attributed to improved efficiencies, lower raw material costs, better hedging positions and effective cost management. 

Purefoods’ core businesses - poultry, feeds and flour - were the key profit drivers, having benefited from stable pricing and softening raw material prices.  The dairy and piggery businesses also posted significant improvements in profitability.