San Miguel Corp. (SMC), the Philippines’ biggest listed company, is considering buying back its traded shares to become a privately held corporation, saying disclosures have hampered acquisition plans.
Buying back the shares may cost about $800 million, President Ramon Ang said in an interview yesterday. San Miguel had a public float of 14 percent as of May 5, it said in a statement at the time. That’s worth about 40 billion pesos ($944 million) based on today’s share price.
The food and beverage company that’s expanding into oil refining, power retailing and infrastructure is also in talks to buy an overseas company with an enterprise value of $10 billion, Ang said. The target has a “potential free cash flow of between $2 billion and $3 billion a year,” he said. The discussions may take “a few more months,” Ang said.
Compliance with the Philippine Stock Exchange’s requirements on disclosures has sometimes made it difficult for San Miguel to make purchases, Ang said. The Philippines’ most acquisitive company, which started as a brewer more than a century ago, seeks to triple the 7 percent return on equity it gets from its traditional food and drinks businesses.
San Miguel “contemplates to list all its operating subsidiaries, inclusive of the new businesses,” Ang said in a statement to the stock exchange today. “San Miguel Corp. shall remain listed, owing to its iconic status in the country.”
The statement was issued in response to queries it has received, the company said.
‘Strong’ Balance Sheet
San Miguel rose 1 percent to 122 pesos at the close of trading in Manila, paring gains after rising as much as 2.7 percent earlier. The stock has lost 26 percent this year, compared with a 3.7 percent gain for the Philippine Stock Exchange Index.
“If your balance sheet is strong like San Miguel, you don’t need to be publicly listed,” Ang said at the company’s headquarters in Manila. “If I have my way, I will privatize it next year,” he said.
Listed companies are more prone to “leakage” of information, and disclosures sometimes work to the advantage of competitors, Ang said.
“Maybe San Miguel is thinking that it’s better to list all operating units and keep the parent firm private,” Hans Sicat, president of the Philippine Stock Exchange Inc. (PSE), said today before the company’s statement to the exchange. “The best value could be in the operating units.”
‘Ill Advised’
San Miguel had 127 billion pesos in cash and near-cash items as of June and has a total of 186 billion pesos of bonds and loans due by 2019, according to data compiled by Bloomberg.
“I think Mr. Ang is ill advised,” said Astro del Castillo, managing director at Manila-based First Grade Finance Inc. “A listed company has more advantages than a private-held corporation in terms of financing and attracting investors.”
San Miguel is the biggest shareholder of Philippine Stock Exchange with a 10.3 percent holding, according to data compiled by Bloomberg.
San Miguel units such as Petron Corp. (PCOR), the country’s biggest refiner, and San Miguel Brewery Inc. (SMB) will probably remain listed, Ang said.
Ang declined to provide more details on the acquisition target such as which industry it operates in or where it’s based.