Gov't to sell P80-B SMC preferred shares

MANILA, Philippines - The government will eventually sell its preferred shares in diversifying conglomerate San Miguel Corp., saying that businesses are better off in the hands of the private sector, the Department of Finance (DOF) said yesterday.

If SMC exercises its right to redeem this year the non-voting preferred shares held by the government, the state has no choice but to give this up, Finance Officer-in-Charge and Undersecretary for Privatization John Philip Sevilla said.

Whichever comes first, Sevilla said the end result is an eventual sale of the government’s stake because the government has been trying to leave to the private sector those businesses outside its expertise.

The government’s preferred shares in San Miguel, estimated at roughly P80 billion belong to coconut farmers as ruled by the Supreme Court.

 “We are not in a hurry to sell the preferred shares but eventually we will because the government wants to get out of private businesses,” Sevilla said.

The government holds 753.8 million preferred shares in the diversifying conglomerate. This was equivalent to 24 percent common shares that were converted into non-voting preferred shares in 2009.

SMC has the option to redeem the shares this year, which Sevilla said is a possibility.

“If they redeem it, we have no choice but to just get the cash,” he said.

Proceeds of the redemption or an eventual sale would be used to help coconut farmers, Sevilla said.

In a disclosure to the Philippine Stock Exchange (PSE) early this month, SMC said it was looking to refinance the preferred shares it issued in 2009.

SMC is reportedly looking to raise P80 billion in a preferred shares offering in September, proceeds of which will be used to redeem the shares held by the government.

The sale of the government’s stake in San Miguel and the removal of the voting rights of this bloc were among the issues raised by coconut farmers when the Supreme Court approved in 2009 the conversion of the 24 percent sequestered common shares into preferred shares.

The government agreed to the conversion because owners of preferred shares are paid higher dividends in exchange for the removal of their right to vote on the company’s business decisions.