SMC to proceed as planned on Cosmos deal

San Miguel Corp. (SMC) is pushing through with its due diligence audit of Cosmos Bottling Corp. even as the RFM softdrinks subsidiary is in the middle of a legal battle intended to stop its sale.

SMC sources said the restraining order on the sale of CBC obtained by Iloilo Congressman Augusto Syjuco does not cover the conduct of due diligence by SMC, which is prepared to shell out P15 billion for 100 percent of CBC, the country’s second largest softdrink firm.

In late July, the boards of both SMC and RFM Corp. – which owns 83.2 percent of CBC – approved in principle the acquisition of the softdrinks bottler subject to the usual due diligence process expected to be completed before the year ends.

Coca-Cola Bottlers Philippines Inc. (CCBPI), a 65 percent subsidiary of SMC, and the Atlanta-based The Coca-Cola Company will acquire CBC’s operations along with its softdrinks brands Pop Cola, Sarsi, RC Cola, Jaz Cola, Cheers and Jolt.

The SMC officials said the due diligence forms part of the memorandum of understanding (MOU) the two parties have signed, indicating the food and beverage conglomerate’s continued interest in acquiring CBC.

But before the sale could be finalized, Syjuco obtained a temporary restraining order (TRO) from the Quezon City Regional Trial Court last Aug. 24 to stop the sale and rescind a 1996 agreement between his company and RFM on the sale of Jaz Cola’s Visayas operations to the Concepcions.

Syjuco even went to the extent of charging the Concepcions with insider trading and stock price manipulation of CBC and RFM shares.

Syjuco liable to investing public – RFM

In a counter statement, RFM spokesman Elmer Yanga said Syjuco could himself be legally liable to the investing public for spreading irresponsible statements on insider trading and stock manipulation, concerning the shares of Cosmos and RFM Corp.

In a letter to Securities and Exchange Commission (SEC) Chairwoman Lilia R. Bautista, RFM said "with the case he filed and the negative publicity he created from it, Syjuco was fully expecting and hoping the share prices of Cosmos and RFM would go into a free fall."

"When the free fall did not take place as he had wanted, Syjuco shifted gears and is now alleging insider trading and stock market manipulations," RFM told the SEC.

Yanga said "there is no insider trading or any form of stock manipulation whatsoever on RFM or Cosmos shares."

"It is simply not possible. The sale of Cosmos is one of the most widely-publicized and fully-disclosed deals in the market. Over the past three moths alone, we have made no less than 25 disclosures to the Philippine Stock Exchange and the media about developments on the deal," Yanga said.

Yanga also discounted the claims of Syjuco on the share price and volume movement of RFM and Cosmos shares, saying that this was a "one-day observation (Aug. 28, 2001)."

"If he had taken the effort to do his homework over the past few months, he would have realized that RFM and Cosmos shares go up or down significantly based on market-driven factors," Yanga said.

Yanga said "thousands of small shareholders could get hurt if Syjuco is allowed to continue spreading false and misleading claims."

"Under Section 57.2 of the Securities Regulation Code, any person who makes false or misleading statements about a listed company shall be liable for all damages incurred by a person who relied upon such statements in purchasing or selling securities," RFM said in its letter to the SEC.

"We, therefore, request the Commission to afford its protection to the investing public and legitimate listed Filipino companies from the likes of Syjuco," RFM said.