Pure Foods to raise P50 billion for expansion

MANILA, Philippines - Shareholders of San Miguel Pure Foods Co. Inc. approved yesterday a plan to raise up to P50 billion from a preferred share and/or bond issuance to fund its expansion program and new businesses, including power generation, water and infrastructure.

Pure Foods president Francisco Alejo III said other proceeds will be used to fund acquisitions in the food business.

In a briefing with reporters yesterday, Purefoods vice-chairman Ramon S. Ang said the fund-raising activity will likely take place in January next year or even later, and will be undertaken in tranches.

“We can do a global peso bond offering but everything is under study.It all depends on investors’ appetite. But we’re definitely going to complete the fund-raising effort next year. And the plan is to raise a maximum P50 billion in funds,” Ang said.

The food company’s shareholders approved the reclassification of 40 million common shares into non-voting, cumulative and non-participating preferred shares, with other features to be determined by management. The move is in preparation for the issuance of up to P40 billion worth of preferred shares.

Pure Foods’ planned preferred share issuance followed failed negotiations between its parent San Miguel Corp. and two prospective buyers – the consortium of the Campos family and private tuna canner Century Pacific Group, and Universal Robina Corp. of the Gokongwei family.

San Miguel rejected their offers since both wanted to acquire 100 percent of Pure Foods, but the conglomerate was only willing to divest up to a 49 percent stake in the firm.

San Miguel owns 99.92 percent of Pure Foods, which owns the Purefoods, Magnolia, Monterey Star, San Mig Coffee and B-Meg brands.

As of end-March this year, Pure Foods had P121.07 billion in cash and near-cash assets as against P209.4 billion in the same period a year ago.

San Miguel itself is planning a P75-billion share offering to fund acquisitions as it seeks stronger avenues to fuel growth. It has raised around $3 billion from asset sales over the past three years.

The conglomerate is hard-pressed to raise funds to cover the purchase of substantial stakes in several companies including power distributor Manila Electric Co., oil refiner Petron Corp., Bank of Commerce, Caticlan International Airport and Development Corp., several power plants, toll road operations and coal mines.

For Petron alone, San Miguel would need to shell out around P19 billion before the year ends if it decides to exercise an option to buy the remaining stake in SEA Refinery Corp., which holds 50.1 percent of Petron.

Between 2009 and 2011, San Miguel will also have to pay P27 billion to the Government Service Insurance System for the state pension fund’s 27 percent stake in Meralco.

Aside from these, San Miguel is considering pursuing two major infrastructure projects – the P65-billion Laiban Dam project in Rizal, which the company said would “alleviate the immediate need to provide an alternative water supply for Metro Manila” and the Diosdado Macapagal International Airport in Clark, which would be worth more than P8 billion.