San Miguel still liable for disclosure rules violation

San Miguel Corp. is not yet off the hook with respect to possible violations of disclosure rules, the top executive of the Philippine Stock Exchange (PSE) said yesterday.

PSE president Francis Lim said the bourse’s Issuer and Markets Regulation Division is now reviewing San Miguel’s reply to a show-cause letter to determine whether the food and beverage giant satisfactorily complied with its disclosure obligations.

Lim said the review is also aimed at determining whether the bourse would still need to require San Miguel to submit a copy of the option agreement. “The Issuer and Markets Division would decide whether San Miguel’s explanation alone would suffice,” he said.

The PSE chief also explained that the exchange meant no harm when it referred to the Securities and Exchange Commission the issue of the applicability of the mandatory tender offer rules in connection with the option agreement between San Miguel and Ashmore unit SEA Refinery Holdings B.V. involving the former’s acquisition of up to 50.1 percent of oil giant Petron Corp.

To assist San Miguel in preparing a comprehensive reply/and or disclosure of material information, the PSE requesed the company to disclose certain facts which include the nature of the option, strike price or exercise price per share, duration of the option, exercise date, option fee/premium, if the option fee will form part of the total consideration upon exercise, any conditions for the exercise of the option, basis upon which the option price exercise was determined, spot price of the underlying shares, any anticipated dividends in the underlying asset and voting agreements regarding Petron, among others.

San Miguel refused to provide a copy of the option agreement, saying it was bound by a confidentiality agreement it signed with SEA Refinery.   It cited Article 1314 of the Civil Code which states that “any third person who induces another to violate his contract shall be liable for damages to the other contracting party.”

“The right of private parties not to disclose agreements between or among them is protected by the constitutional rights of liberty, property and privacy. They continue to be private agreements and the documents evidencing the agreements continue to be private documents, not subject to examination or reproduction by the public,” San Miguel said in an earlier disclosure to the PSE.

San Miguel also pointed out that SEA B.V. has no relationship or disclosure obligation to the PSE.

Under the option agreement, San Miguel has the exclusive right to acquire up to 100 percent of SEA Refinery Holdings B.V.’s interest in SEA Refinery Corp. which owns 50.1 percent of Petron. The option may be exercised by San Miguel within a period of two years from Dec. 24, 2008.

San Miguel assured the public that while the option agreement does not trigger a tender offer at this time, the conglomerate will comply with all applicable laws, rules and regulations.