San Miguel: further divestments in prospect

After reaching a deal with Japan“s Kirin Holdings to sell a substantial interest in its beer unit, San Miguel Corp. is looking to sell off large stakes in other units to settle debt and fund expansio…

After reaching a deal with Japan“s Kirin Holdings to sell a substantial interest in its beer unit, San Miguel Corp. is looking to sell off large stakes in other units to settle debt and fund expansion, the president of the Philippines“ largest food and beverage conglomerate by sales said 20 January 2009. Ramon Ang, who is also San Miguel“s vice chairman and chief operating officer, indicated that as a policy, San Miguel would sell shares in all operating companies and just keep 51% consolidated control. He said proceeds from the planned divestments will be used to pay debt as well as finance the company“s expansion to heavy industries. Mr. Ang said that within the year San Miguel is planning to sell portions of its shareholdings in the food and packaging businesses. The conglomerate still holds 65% of San Miguel Yamamura Packaging Corp. after it sold a 35% stake in January 2008 to Japan“s Nihon Yamamura Glass, and a 99% interest in listed food company, San Miguel Pure Foods Co. San Miguel“s other listed operating units are 80%-owned liquor manufacturer Ginebra San Miguel Inc. and 99%-owned San Miguel Properties Inc. On 19 January 2008, Japan“s Kirin announced it had signed a deal with San Miguel to acquire 43.25% of San Miguel Brewery Inc., a stake worth PHP 58.65 billion (USD 1.2 billion). San Miguel had total long-term debt of USD 923 million at the end of September, down from USD 1.2 billion at the end of 2007 after the company paid off USD 277 million in early 2008. As part of its diversification into heavy industries, the conglomerate recently acquired a substantial stake in Manila Electric Co., the country“s largest power distributor by sales and an option to buy control of Petron Corp, although the corporation has assured it has not violated any of the loan covenants, including a prohibition on investing more than 10% of its assets outside its core business of food, beverage and packaging.