Bigger and stronger San Miguel

San Miguel Corp. (SMC) recent one-for-10 stock rights offering was a huge success, no doubt about it.

The majority of the shareholders, including major shareholders Kirin Brewery, SM Investments, and the government (through the Coconut Industry Investment Fund, the Social Security System and the Government Service Insurance System), who opted to exercise their rights made a wise investment decision. On the other hand, those who did not avail themselves also benefited without lifting a finger due to a substantial appreciation in the value of their investment in Southeast Asia’s largest publicly listed food and beverage conglomerate.

Stock rights offering is an efficient way of raising capital and at the same time gives equal opportunity to existing shareholders to maintain their interest in what potentially could be a regional food and beverage powerhouse.

For those who did not participate, they also have everything to gain. Their share in the company may be smaller, but because SMC’s value increases when it uses the proceeds of the stocks offering to buy other companies, the pie becomes larger and, therefore, their actual investments become bigger. Stockholder A for instance who used to own one percent of a P1-billion company will end up owning 0.75 percent of a P2-billion company.

SMC intends to use the P17 to 18 billion proceeds of the stock rights offering to finance the planned acquisition of certain foreign companies engaged in related businesses, including Australia’s National Foods and New Zealand Dairy Foods. Last year, it acquired 51 percent of Australia’s largest fruit juice company Berri, and more recently, King’s Creameries of Singapore.

Company officials have explained that the acquisitions would give SMC a more balanced portfolio, both in terms of products and markets, thus reducing the company’s risk profile. These would also boost chairman Danding Cojuangco’s dream for SMC to become the leading food and beverage company in the region, a dream that if realized could contribute greatly not only to the country’s image but also revenues from overseas.

Modus Operandi

ital trunk radio operator Next Mobile is definitely not alone in complaining about bidding irregularities in the Philippine National Construction Corp. (PNCC), bolstering my suspicion that a mafia exists in this agency which has been listed as one of the most corrupt government agencies in the country.

I was shocked to find out that the names of the people inside PNCC allegedly involved in the bidding scam that victimized Next Mobile in favor of another trunk radio operator Contel are exactly the same people who have victimized leading health maintenance organization Intellicare.

Here is Intellicare’s story.

Last Oct. 15, 2004, Intellicare, specifically Asalus Corp., received an invitation from PNCC to bid for their non-tollways healthcare plan services. To cut a long story short, there were three prequalified bidders. Medicard posted the highest bid, followed by Asalus, and then SP Care. Being the lowest bidder, SP Care got the contract.

Around two months into the contract with SP Care, PNCC’s board decided to pre-terminate the contract due to complaints from PNCC’s employees. Under Republic Act 9184 or the Government Procurement Reform Act (of which PNCC seems to be feigning ignorance about), a government agency such as PNCC should have ordered a new bidding instead of a negotiated bid.

But considering the urgency of the requirement, PNCC could have awarded it to the second lowest bidder which is Asalus. Lo and behold! PNCC awarded the contract to Medicard, which is the highest bidder, a clear violation of the Anti-Graft and Corrupt Practices Act, for being a contract disadvantageous to the government. No advise whatsoever was given to Asalus/Intellicare.

Medicard and Intellicare are among the top three HMOs in the country. PNCC chose SP Care because it posted the lowest bid. In all other respects, the three bidders are supposed to be equal because they offer the same maximum benefit limit. Now, it decides to give the contract to the highest bidder on the lousy excuse that Medicard is better than Intellicare? Better in terms of what? The bidding specs were very clear. Once the bidders are prequalified, they become equal in all respects, except for the price.

Just like in the bidding for communications services that victimized Next Mobile, the officials of PNCC led by its president and CEO Pastor Ramos, its OIC Felipe Alday, and materials management division/bidding committee head Yolando Mortel, decided without regard to the need for transparency in government transactions to change the rules midstream, on the flimsy excuse that under the bidding rules, it has the right to reject any or all bids for any reason whatsoever without the need to offer any reason for such rejection.

PNCC Skyway, a subsidiary of PNCC, is currently enrolled under Asalus, which used to handle PNCC itself from 1999-2002. Medicard then handled PNCC’s account until SP Care got in. If Medicard was better than Intellicare, then how come a significant number of the PNCC board members decided to avail themselves of the HMO benefits under Skyway instead of PNCC’s?

Alday, in his letter to Intellicare, maintains that it is PNCC’s prerogative to choose the most qualified HMO to take over SP Care whose services were terminated. He adds that the primary consideration in determining the most qualified healthcare service provider is "its proven performance, competence, capability, and excellent track record in rendering service to our employees."

If this were the case, then why did PNCC award the contract to SP Care in the first place?

Had Next Mobile been the only one complaining about being victimized by PNCC, then some people may be quick to dismiss Next Mobile as a sour loser. But if another company complains about the same modus operandi, involving the same set of people inside PNCC who have shown no regard whatsoever to public accountability and transparency in public transactions, then something is definitely wrong. Who knows, there may be other victims?

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