Monday, May 31, 2010

Shareholders OK San Miguel diversification plans

MANILA, Philippines - San Miguel Corp. shareholders on Monday gave their backing to the conglomerate’s diversification plans, among them proposals to sell down over 51% of its core businesses and the declassification of its shares.

San Miguel President and CEO Ramon S. Ang, speaking to reporters following a stockholders’ meeting, highlighted the diversification push in announcing that the firm was buying land on an island across the tourist haven of Boracay to quell competition for a newly acquired airport project.

Mr. Ang said continued diversification would allow San Miguel to match or outperform P57.8-billion profit in 2009. The firm has expanded from its core businesses of food and beverage into high-growth sectors like power, infrastructure and telecommunications, beginning with the spin-off and public listing of San Miguel Brewery in 2007.

The plan to sell 51% of "major subsidiaries" is aimed at allowing San Miguel to invest in other businesses such as mining and telecommunications. The firm did not name the subsidiaries, although it is in the process of selling 49% of its food subsidiary after allowing Japanese partner Kirin Holdings Co. Ltd. greater control over San Miguel’s beer brewing unit.

San Miguel also declassified its "A" and "B" shares and will have only one class of common or voting shares to get a "broader investor base" and "greater public participation." The firm’s "A" shares are restricted to Filipinos while "B" shares are open to all.

Class "A" and "B" shares in the company rose to P74 and P76 each yesterday from P72.50 and P73, respectively, on Friday.

Ferdinand K. Constantino, chief financial officer of San Miguel, said some units would be left to the management of "strategic partners."

"The strategic partners will improve the company’s ability to focus on power, telecommunications, infrastructure and mining assets ... while expanding core businesses," he said during the annual meeting.

Strong demand for alcoholic beverages and better-than-expected results from its packaging and food businesses, along with a one-time gain from a stake sale in its brewery unit, allowed San Miguel to post a 199% rise in net income in 2009.

Mr. Ang said Petron Corp., in which San Miguel will buy a majority stake, would add P200 billion in sales per year.

The sale of a 49% stake in San Miguel Pure Foods Co., Inc., which he said had a value of $1.8 billion, will also hike profits.

Mr. Ang, meanwhile, said the conglomerate would be buying land on Carabao Island in Romblon, right across Boracay, to head off competition for its P2.5-billion project to upgrade the Caticlan airport, which serves as the jump-off point to the tourist haven.

"Bibilhin na namin para wala nang gulo, pero hindi masyadong malaki (We will buy it to prevent problems but not at a price too high)" he said about rival investors said to be seeking to build an international airport on Carabao Island.

Mr. Ang said the Carabao Island airport investors were willing to sell at P500 per square meter, a tidy profit from the original price of P50. He did not identify the investors and did not indicate the size of the land.

The island, described as 4 times the size of Boracay with the same white sand beaches, is home to 11,000 people and hosts the town of San Jose. Boracay island is about 20 minutes away by boat.

San Miguel, however, has yet to find a use for the Carabao Island property.

"The Carabao Island to Boracay [route] has high waves, that is open sea," Mr. Ang said in Filipino. "If you will build an airport there going to Boracay, there will be many accidents," he added.

San Miguel last month took a majority stake in Caticlan International Airport Development Corp., the firm holding the P2.5-billion contract to modernize and expand the airport.

A 25-year concession agreement was signed in June 2009 by the consortium, previously headed by George T. Yang, with the government for the modernization of Caticlan airport under a build-rehabilitate-operate-transfer scheme.

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