Ramon Ang’s business secrets: Candor and cash flow

ANG: Disarming openness from the head of a $20-billion empire.

Ramon Ang walks into the conference room the way he always does: With a beaming smile and his right hand offering a handshake long before you’re even in range to grasp it.

“Pare!” the president of San Miguel Corp. exclaims, using his favorite greeting that never fails to surprise his guests. This isn’t my first time to be greeted by him in this manner, but I’ve seen this effusive one-word exclamation disarm guests before, regardless of whether they bring good tidings or bad.

“Please have a seat. What can I offer you? Coffee? We have excellent coffee here,” he says, pointing with pride down the hall to what looks like a full-sized industrial kitchen gleaming with aluminum fixtures.

“Coffee!” he commands in a booming voice. With a smile that speaks of pride in his craft, the head of the permanent waitstaff at the eight floor of San Miguel Corp.’s sprawling headquarters in Mandaluyong City retreats to the backroom in compliance.

“What can I do for you today?” Ang asks me and Bloomberg reporter Cecille Yap, with whom I was double-booked for this afternoon’s interview (“Sorry, but he has a very tight schedule. I hope it’s ok if you share an interview slot with Bloomberg,” explained San Miguel vice president Jane Llanes, who liaises with the media.)

Hot topic

The current hot topic is San Miguel’s P20.1-billion bid for the Cavite-Laguna Expressway (Calax). A few days earlier, the Department of Public Works and Highways (DPWH) disqualified the conglomerate for an allegedly “noncompliant” bid. One document representing a bank guarantee for the project erroneously stated the end date of the bank bond, four days short of the required 180 days—despite the very same document stating in the first page that the guarantee was, in fact, good for “one hundred eighty (180) days”.

With some prodding from the Bloomberg reporter, Ang launches into an impassioned narration of his conglomerate’s Calax bid.

“It was a typographical error on the part of the bank,” he says, flipping out a copy of the disputed guarantee letter. “DPWH asked us to explain. They asked [San Miguel’s partner bank] ANZ to explain. ANZ says it was a typographical error. They put Nov. 25 on the second page when it should have been Nov. 29. But the first page clearly states that the guarantee is good for 180 days, both spelled out in words and numbers.”

“So what I’m wondering about is this: Why did they ask us to clarify … and once we clarified, reject our explanation?” he says in the direction of the Bloomberg reporter, throwing up his hands in mock surprise. He tallies with his fingers the numerous times government agencies supposedly gave more leeway to rival bidders in other projects, but came down hard on San Miguel on this one.

Then he turns to me with mouth agape: “Nakita mo ’yun?” I’ve seen that expression before. It’s the closest thing a tycoon like Ang—who likes being in control of the situation—will come to admitting that he feels aggrieved by another party: Did you see what they did?

The Bloomberg reporter beats me to the question: Has Ang spoken with President Aquino about the Calax controversy yet? It is common knowledge in the business community, after all, that Ang has close ties with the President. It is also known that Ang makes it a point not to bring up business matters whenever he’s with the President, preferring instead to talk about more mundane, unofficial topics.

Presidential friend

According to one source, the President once expressed his concern to Ang about rumors that one Cabinet official was making life difficult for the diversified conglomerate. The San Miguel chief supposedly replied: “Huwag mo nang alalahanin ’yun, Mr. President. Marami ka nang inaasikaso. Kami nang bahala dito.” Don’t worry about it. We’ve got this.

The Bloomberg reporter presses on about San Miguel’s next step with regard to the Calax controversy. Is the conglomerate asking for Presidential intervention? Ang replies: “We did file an appeal with Malacañang. We have to exhaust all means available to us before even considering legal remedies. But I don’t want to bother the President personally over this. He already has a lot on his mind.”

Just then, one of Ang’s two old-model Nokia mobile phones rings. He looks at the caller ID and abruptly walks out of the room. “Good afternoon, sir …” His voice trails off as he slides the glass doors of the conference room shut, and walks down the hallway. The smoked glass dividers of the conference room have clear bottom panels, allowing me a glimpse of Ang pacing back and forth in his rubber sandals (he changes into formal wear for VIP guests) outside. He is away for a good 15 minutes, leaving the Bloomberg reporter and I to exchange gossip with Jane, who also serves as Ang’s all-around troubleshooter.

Ang walks back into the conference room and tosses his mobile phone onto the table. He also tosses us small bars of chocolate from a pile he just brought in: White chocolate for me, dark chocolate for Cecille, milk chocolate for Jane. Then looking at the pile he still had left, starts tossing chocolate bars at us randomly across the table.

“That was Malacañang,” he says, pointing at his Nokia phone. “The official said the ‘other side’ (meaning the rival conglomerate bidding for Calax) complained to the Palace that we were doing black propaganda against them, and they asked if it’s true. I replied ‘Me? Of course not! They’re the ones doing black propaganda against San Miguel.’”

On cue, Ang flips out a clipping of a columnist who, just that very day, was harping in his newspaper column about San Miguel’s supposedly high debt levels, and the dangers this posed to the broader economy should things get out of hand. “Wasn’t this column based on a study written by a board director of the rival conglomerate?” he says with a glint in his eye—an expression when one’s point is proven. “Do you see now?”

Comfy with debt

I see an opening, and steer Ang toward the uncomfortable topic of San Miguel’s debts. At present, it holds about $12 billion worth of obligations—levels that make other conglomerates cringe—vis-a-vis about $20 billion in “conservatively valued” assets across its empire. San Miguel also has about $5 billion in cash compared to $393 million in debts maturing this year.

I ask (with a little trepidation that I may have wandered into a forbidden topic): Why is he so comfortable with debt? Jane uneasily shifts in her seat and looks at her mobile phone … whose voice recorder has been running since Ang sat down.

To my surprise, Ang’s face lights up, his gaze transfixes onto a point on the wall, and he flashes a broad smile: “You want to know? I’ll tell you why.”

“In 1997, just before the Asian crisis, all my businesses—cement, and pulp and paper mills —had very cyclical cash flows. And I learned the hard way: You can’t borrow money during a crisis when you have cyclical cash flows,” he says.

Then he beams with pride: “I could have forced all my creditors into a debt rehabilitation plan. I could have forced them into dacion en pago settlements. I could have forced them to take [payment] haircuts. But no, I sold my assets, instead, to pay all of our obligations.”

Ang thumps his index finger down on the table hard: “Not a single cheque bounced. Every single centavo was paid.”

Since then, he’s made it a point to invest only in firms that provide steady cash flows. I shoot a glance at Cecille, and suddenly, we understand why he always uses “cash flow” when describing acquisition targets. It now makes sense.

“Recurring and steady cash flows,” Ang says, leaning forward, as if to whisper something. “That’s the secret. That was my learning curve.”

By this time, his executive assistant, Guada, walks into the conference for the third time to deliver her third note: His next appointment has been waiting for several minutes now. “Feed them first,” he tells her. “And serve them coffee, too.”

He stands up abruptly and extends his hand. The interview is over.

Then he looks over to Jane: “On the day our next deal is signed, remind me to tell Cecille and Dax about it first.” The Bloomberg reporter and I exchange looks and blink our eyes in unison, silently saying: He knows our weakness.

And with that, Ramon Ang steps out and makes a beeline for the adjacent conference room where his next appointment waits. “Pare! …” I hear him greet his guest.