SM Group eyes bigger stake in San Miguel

The SM Group of tycoon Henry Sy Sr. is looking at increasing its stake in food and beverage giant San Miguel Corp.

SM Prime Holdings Inc. executive vice president Henry Sy Jr. said his family, which acquired a 6.2-percent stake in SMC in 2002, is open to raising its shareholdings in Southeast Asia’s largest food and beverage conglomerate should there be an opportunity. "SMC is a good company. If there’s an opportunity, we will see," Sy said.

The SMC shares were bought from the SMC Retirement Fund at P55 each or a total of P9.63 billion, entitling the Sy family to a seat on the 15-man SMC board of directors. Dutch financial giant ABN-Amro served as financial advisor to SM Investments on the transaction.

The deal involved 175 million common "A" shares in a cross deal on the Philippine Stock Exchange. It was the largest stock transaction on SMC shares since Japan’s Kirin Brewery Co. Ltd. purchased a 15- percent stake in the food and drink company.

The Sy family has interests in retailing (Shoemart Inc.), mall operations (SM Prime), gaming (Sage), leisure estate (Highlands Prime Inc.) and banking (Banco de Oro Universal Bank).

Analysts said the transaction was a win-win deal for both SMC and the SM Group. The buy-in allowed the SM Group to widen its portfolio of investments. SMC, for its part, has benefited from better access to the SM Group’s mall nationwide operations.

Established in 1890 as a small brewery, SMC today has over 100 production facilities in six countries. The company and its subsidiaries are primarily engaged in the production, processing and marketing of beverage, food and packaging products. It is also engaged in the management and development of real estate properties.

SMC has expanded significantly in addition to its businesses in beer, coconut products and packaging. SMC has established major subsidiary and affiliate operations in soft drinks, hard liquor, mineral water, fruit juices and fruit drinks, coffee, dairy products, butter, margarine, cheese, animal feeds, chicken, processed and semi-processed meats and hogs and cattle.

The conglomerate is embarking on a massive regional expansion program to further boost its profitability. It has earmarked P26 billion ($500 million) to put up food manufacturing complexes in

Thailand, Malaysia, Vietnam, Taiwan, China, Indonesia and Australia, which SMC said, represent the future for the conglomerate which has grown too big for the local market.

The manufacturing complexes will be wholly-owned by San Miguel. They will be involved in beverage, food processing and packaging. SMC expects an annual sales revenue contribution of $300 million from each of these companies.

International operations contribute only about 15 percent of total revenues of SMC. After the expansion, the contribution is expected to go up to 60 to 70 percent.