San Miguel to earn P17B
from preferred shares
BY ALBERT CASTRO
San Miguel Corp. is raising P17 billion in additional capital by selling the portion of a 1.1 billion preferred shares offering which remained after shareholders, primarily the government, decided to convert only 873.17 million common shares.
In a disclosure, the company said the remaining 226.8 million preferred shares Series 1 will be sold through private placement to an undisclosed investor.
San Miguel said the proceeds will be used "to finance investments and acquisitions of the company."
"The board has authorized management to determine the issue price and dividend rate of said preferred shares," San Miguel said.
San Miguel created the preferred shares to accommodate shareholders who worry that its diversification program would deprive them of the regular dividends they receive.
The 1.1 billion preferred shares were equivalent to the number of common shares, placed at 36 percent, not strategically held by the Cojuangco Group and its ally the Kirin Beer Group of Japan.
The shares were priced at P75 per share, a 14.5 percent premium over the P65.50 closing price of Class A and 13.63 percent over the P66 closing price of Class B shares. When the offer was announced, San Miguel was trading at P50 and below range.
The non-voting shares carry a cumulative dividend rate of 8 percent of the conversion price. San Miguel has the option to redeem the preferred shares in the third year after issue.
On listing date, however, only 27.64 percent converted. The government accounted for virtually all of the conversion with 27.63 percent.
A coconut farmers group, meanwhile, assailed the government for opting to convert the sequestered common shares into preferred, saying industry members will lose whatever benefits they are enjoying now.
Charles Avila, chairman of the Philippine Association of Small Coconut Farmers’ Organizations, said the yield from the preferred shares may be substantially higher than dividends on common shares but the money will be locked in an account which cannot immediately be used for the benefit of farmers.
By Avila’s calculations, the 27 percent holdings will yield P4 billion to P5 billion yearly against the historical dividend payout of P1 billion a year.
Before the conversion, the dividends were remitted and deposited in a trust account maintained with United Coconut Planters Bank Trust Business Group. The money was used for additional working capital of the oil mills funded from the coconut levy, for premiums for life insurance policies issued to coconut farmers, and for replanting and other farm programs.
"This recent court decision, however, expressly states that the net dividend earnings on the converted shares should now be deposited in an escrow account in the name of the Republic of the Philippines and remain in custodia legis until the final ownership determination by the Supreme Court," Avila said.
While the Supreme Court has ruled that the 27 percent holdings were ill-gotten, no determination has been made on ownership.
Farmers’ groups claim ownership over the holdings on the ground that the coconut levy which was used to buy the shares belongs to them.
The Presidential Commission on Good Government, however, maintains the real owner of the holdings is the national government.
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