San Miguel sells stakes in Aussie ventures for $2.94B

San Miguel Corp., Southeast Asia’s largest food and beverage conglomerate, has sold its Australian businesses National Foods Ltd. and J. Boag & Son in a deal valued at $2.94 billion, further building up its warchest ahead of its planned foray into emerging non-allied businesses such as power, infrastructure and mining.

In separate disclosures filed at the Philippine Stock Exchange, San Miguel said it reached an agreement with Japanese brewer Kirin Holdings Co. Ltd. for the sale of Australian dairy giant National Foods Ltd. for A$2.8 billion ($2.6 billion).

In addition, San Miguel sold Tasmanian brewer J. Boag to Australian rival Lion Nathan Ltd., another company owned by Kirin, for $301 million. Kirin holds a 19.95-percent interest in San Miguel and a 46.1 percent stake in Lion Nathan.  The sale is expected to be completed before the end of December.

“We are redefining our company and paving the way for San Miguel to enter into high-growth businesses...for enhanced financial performance and growth. We believe growth and returns can be increased through continued focus and investment on San Miguel’s advantaged core businesses. Therefore, following a strategic review of our Australian portfolio, we have decided it would be in the best interests of our shareholders to look into the sale of the business,” said San Miguel president Ramon Ang.

National Foods, which produces milk, juice and cheese products, was acquired by San Miguel for A$1.9 billion in 2005. Since then, San Miguel has consolidated into the dairy company, leading Australian juice manufacturer Berri; specialty cheese producer, Lactos; and Malaysian ice cream manufacturer Kings Creameries. Berri was acquired in 2004 while Kings Creameries was acquired in 2005. Lactos was bought by National Foods in 2006.

Meanwhile, from annual sales revenue of A$61 million in 1999, prior to San Miguel’s acquisition, J.Boag’s revenue has risen to A$92 million last year. Its brands include flagship product Premium Lager, Australia’s second largest selling domestic premium beer brand; and Boag’s Premium Light, St George, Classic Blonde, Draught and Strongarm.

This twin sale followed a string of divestments earlier made by San Miguel this year. Those included a 65-percent interest in softdrink giant Coca-Cola Bottlers Philippines Inc. (CCBPI) raising around $590 million; and a 42.2 percent stake in NutriAsia San Miguel Holdings for $150 million.

NutriAsia controls Singapore-listed food and beverage outfit Del Monte Pacific.

According to stock market analysts, these divestments would boost San Miguel’s warchest to around $3.7 billion (roughly P163.9 billion), which the 117-year old conglomerate could use to fund its entry into heavy industries such as power, mining and infrastructure.

San Miguel earlier disclosed plans to invest about $750 million, equivalent to a tenth of its total assets, in these new businesses.

Founded in 1890, San Miguel is seeking new engines of growth amid struggling domestic demand for beer, its anchor product.

San Miguel is one of five bidders for the government’s 60 percent stake in top geothermal company PNOC-Energy Development Corp. worth nearly $1.3 billion at current market prices. The winning bidder will be known on Nov. 21.

San Miguel is also bidding for the country’s power grid in partnership with Malaysia’s state power firm and US private equity firm Texas Pacific.  The grid is expected to require $850 million over the next five years for upgrades and expansion. The auction has been scheduled on Dec. 12.

Following the disclosures, trading in San Miguel shares had been suspended yesterday as requested by the company.

In another development, San Miguel said its net income in the nine months ending September this year rose 15 percent to P7.07 billion, which included a gain of P870 million from the sale of CCBPI and net of consolidated financing charges of P4.73 billion.  Consolidated revenues amounted to P170 billion, up eight percent from the year ago level on the back of improved beer, hard liquor and domestic food businesses.

Consolidated operating income, however, fell 14 percent to P12.3 billion largely due to the lower than expected operating income performance of National Foods, dragged down by high costs of dairy raw materials and imported juice concentrates amid tight supply and the prologed drought.

San Miguel’s local beer operations recorded seven straight months of volume and revenue growth while international beer operations sustained its profitability for the fourth consecutive month driven by robust north and south China operations.

Sales revenues from international beer operations increased eight percent while operating income amounted to $4.3 million or a reversal of the previous year’s operating loss.

San Miguel’s hard liquor unit Ginebra San Miguel, meanwhile, registered revenues of P9.5 billion or an increase of two percent from the previous level on the back of a six percent rise in volume.

The food division likewise registered a seven percent increase in revenues to P43.5 billion due to higher volumes across almost all businesses. Operating income amounted to P1.8 billion, up 15 percent due to significant contributions from value-added meats and flour businesses and the notable performances from the dairy cluster and regional operations.

San Miguel Packaging Specialists Inc., on the other hand, reported a lower operating income of P365.6 million due to sluggish demand from beverage customers.