SMC’s biggest stockholder plans listing by introduction

MANILA, Philippines - The single largest shareholder in San Miguel Corp. (SMC) is listing in the local bourse as it ends its cross ownership structure with the diversified conglomerate.

In a disclosure SMC said its received a notice that the board of directors of Top Frontier Investment Holdings Inc. “approved the filing of an application with the Philippine Stock Exchange for the listing by way of introduction of all the common shares of Top Frontier.”

The shares to be listed include the common shares of Top Frontier declared as property dividends.

In a separate disclosure, SMC said its board of directors approved the “declaration, by way of property dividends, of 240.19 million common shares of stock of Top Frontier Investment Holdings Inc. owned and held by the corporation.”

Specifically, the investing public will get one common share in Top Frontier for every 10 common shares of SMC that they own. Record date is Nov. 5 while payment date has yet to be determined.

SMC owns 49 percent of Top Frontier which, in turn, owns 39 percent of the conglomerate. The cross ownership structure allows both parties to block any takeover or entry of hostile entities given each other’s rights to match any offer from potential investors.

“[The property dividend] results in a dividend yield of 18.9 percent. The yield will be the same regardless of the price of SMC,” said brokerage firm RCBC Securities Inc.

“However, note that the Top Frontier shares cannot be monetized until they are listed, eventually converted by SMC into SMC shares or acquired by the remaining shareholders of Top Frontier,” RCBC Securities added.

Astro del Castillo, managing director of First Grade Finance Inc., said the move is seen to end the cross ownership scheme between the two companies.

It will also result in a clear delineation on who owns SMC, Del Castillo said.

Top Frontier, backed by former trade minister Roberto V. Ongpin, businessman Iñigo U. Zobel and condiments king Jose Y. Campos, is the single largest shareholder of SMC. Its only asset is SMC shares.

In 2007, the SMC started selling parts of key businesses to fund diversification from the mature food and beverage businesses into high-growth and capital-intensive sectors like power generation, mining, infrastructure and telecommunications.

From its core brewery and food business, SMC has expanded into power production (SMC Global Power Corp.), downstream oil sector (Petron Corp.), packaging (San Miguel Yamamura Packaging Corp.), airline (Philippine Airlines) and several infrastructure projects like the Caticlan airport, Skyway, and the NAIA Expressway. So far, around 70 percent of the company’s revenues are already coming from new businesses.

In the first half, foreign exchange losses dragged the diversified conglomerate into the red. Including unrealized forex losses, net loss attributable to the equity holders of the parent company hit P2.4 billion, reversing the P14.12-billion income in the same period last year.

But SMC’s revenues reached P357.5 billion, up nine percent from last year due to strong performances from food subsidiary SMPF and Petron Malaysia, which was consolidated into the the SMC Group in April 2012.