The Philippines: San Miguel Corp slashes size of drinks and food unit shares sale by almost half

Philippine conglomerate San Miguel Corp slashed the size of its food unit’s share sale by almost half to $920 million, as a weak stock market thwarted what could have been the nation’s biggest ever secondary offering, Reuters reported on October 18.

The sale of a minority stake in San Miguel Food and Beverage is part of the parent firm’s restructuring plan that was first mooted about a year ago.

In a regulatory filing to the stock exchange on October 18, the food unit said San Miguel is seeking to sell a total of 523 million shares in a price range of 85 to 95 pesos per share.

This excludes an over-allotment option of up to 15 percent of the offering.

The price range compares with regulatory filing figures of up to 1.02 billion shares on offer including over-allotment and of up to 140 pesos per share, a premium of about 75 percent to the unit’s trading price at the time of the announcement of the plan.

While regulatory filing prices are often set far above expected bookbuilding ranges in the Philippines, it is not common for the number of shares on offer to be cut.

San Miguel Food and Beverage is the Philippines’ market leader in beer, gin, branded processed meats, butter, animal feeds and fresh meat. It is the maker of the popular San Miguel Pale Pilsen and Red Horse beer.

Though its brands are well known and still growing in double digits, the company is weighed down by bad timing, said Helen Go Oleta, trust trading head of Manila-based Rizal Commercial Banking Corp, which owns shares in San Miguel and its food unit.

“With uncertainties here, with liquidity not as what market was in January, it is a challenge for San Miguel so they decided to reduce the shares,” Oleta said, adding that the shares are attractive at 85 to 90 pesos each, the low end of the range.

Over the past roughly three months, the shares have traded in a range of 63.20 pesos to 104 pesos.

Earlier on October 18, San Miguel President Ramon Ang offered varying statements to reporters about potential pricing, saying both that the shares could be priced at 90 to 100 pesos and that they could be priced between 85 and 100 pesos.

The Philippines' stock market is the worst performing in Southeast Asia, with its broader index .PSI down 16.6 percent year-to-date over worries on high local inflation and Sino-U.S. trade tensions.

“Weakness in stock markets has put further pressure on the pricing,” said one source, who did not wish to be identified as he was not authorised to speak to the media.

JPMorgan, Morgan Stanley and UBS are joint global co-ordinators on the issue, while Deutsche Bank and Goldman Sachs are joint bookrunners. BDO Capital and Investment Corp and BPI Capital Corp are the local lead underwriters.

The international roadshow for the offering is set for Oct. 19-24, which will be followed by final pricing on Oct. 25 and settlement and delivery of the shares on Nov. 12, San Miguel Food and Beverage told the stock exchange.

San Miguel Corp plans to use proceeds from the share sale to invest in its business, but it did not provide details. The conglomerate is pursuing an aggressive expansion plan that involves venturing into infrastructure, mining, petroleum and power generation to boost revenues.

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