SMB plans P40-billion bond issue

San Miguel Corp.’s brewing unit plans to borrow P40 billion through what would be the Philippines’ biggest ever domestic corporate bond issue.

San Miguel Brewery (SMB) would use the proceeds to buy up the beer brands, intellectual property rights and real estate from its parent, it said in a report.

San Miguel spun off about P39-billion worth of brewing assets in line with its radical shift into new lines of business. It sold its domestic beer brands and related intellectual property rights to SMB for P32 billion. It likewise sold the lands used in the beer operations partly to SMB Retirement Plan for P239 million and the rest to SMB at a price of P6.8 billion.

Ramon Ang, president of both San Miguel and SMB, said the brewery would raise the money in the domestic bond market.

“SMB is debt free,” he told Dow Jones Newswires, suggesting that the company has room to borrow.

The company is looking to sell three- and five-year coupon-bearing bonds before the end of February, people familiar with its fund-raising plans told Dow Jones.

The fund raising comes as the parent, Southeast Asia’s largest food and beverage group, builds a war chest to bankroll its diversification into heavy industries.

In a separate statement, San Miguel said proceeds from the sale of its brewing assets to its local flagship brewery firm will be used to pay down debt and cover future acquisitions.

The sale is in preparation for the entry of Japanese brewer Kirin Holdings Co. Ltd. which secured exclusive rights to acquire San Miguel’s 43.25-percent stake in SMB. 

San Miguel said the move is part of an ongoing restructuring program aimed at further boosting its growth.

SMB said the purchase is a strategic initiative to secure the company’s main competitive advantage as it needs full control over the brands.

SMB’s beer brands San Miguel Pale Pilsen, Red Horse, San Mig Light and Gold Eagle are among the top four brands in the country. It also offers popular brands such as Super Dry, Cerveza Negra, San Mig Strong Ice, Gold Eagle and Cali, the country’s only malt-based non-alcoholic drink.