SMC, Cosmos deal hangs over price

As the country’s biggest corporate takeover reaches the homestretch, Cosmos Bottling Corp. and a joint venture of San Miguel Corp. and The Coca Cola Co. have yet to agree on a new purchase price.

A Reuters report yesterday disclosed that San Miguel wanted to further cut its offer price for the controlling 83.2 percent of Cosmos to P13 billion. The change was made after SMC-Coca-Cola carried out a due diligence audit on Cosmos, a unit of food conglomerate RFM Corp.

If concluded, the purchase of Cosmos would seal Coca-Cola’s dominance in the Philippine beverage industry, cornering about 90 percent of the market. Coke now controls 60 to 65 percent of the $1-billion local softdrink industry while Cosmos accounts for 20 to 25 percent. Pepsico Inc., which lost its bid for Cosmos, has about 10 percent of the market.

But RFM officials told The STAR yesterday that ‘what is now on the table is SMC’s offer to reduce the purchase price from P15 billion to P14 billion.’ It was learned that RFM officials talked to SMC officials yesterday who confirmed that the offer is still P14 billion and not P13 billion as reported by Reuters.

"We haven’t even agreed on the P1-billion reduction in the purchase price, what more a P2-billion reduction," the RFM official said.

For his part, RFM vice-president Ramon Lopez told Reuters that ‘there are ongoing discussions but no agreement has been reached.’

Last Wednesday, it was reported that SMC reduced its offer to P14 billion for Cosmos or P5.80 per share from the original offer price of P14 billion per share after its due diligence study.

SMC vice-chairman Ramon Ang earlier said that they no longer wanted to pay as much as P15 billion for Cosmos after the audit showed that many Cosmos bottling plants were in poor condition.

But RFM said yesterday that while the Cosmos bottling plants may not be in the same excellent condition as the ones of Coke, theya re in "good working condition."

"But our valuation was not based on how much the assets are worth. San Miguel and Coke are not buying the assets. They are buying the brand and the valuation was based on the projected cash flow or how much SMC-Coke will earn if they buy Coke. Now, they are mixing the two valuation methods," the official said.

Sources said that if SMC-Coca-Cola insists on further reducing its purchase price offer, Cosmos can always go back to the negotiating table with PepsiCo as well as other parties that have expressed interested in purchasing majority shares in Cosmos.