MANILA, Philippines?Local food giant San Miguel Pure Foods Co. (SMPFC) has offered an annual dividend rate of eight percent per annum on P15 billion worth of preferred shares to be offered to the public within the next two weeks.
According to a memorandum posted by the Philippine Stock Exchange on Wednesday, the dividend rate was based on comparative five-year local bond benchmark plus a spread of around 2.22 percent. The dividend rate is applicable up to the fifth year of the issuance of the preferred shares.
This means that the preferred shares, which will be sold by SMPFC at P1,000 per share, will earn P80 each year for the next five years.
The food company is raising P15 billion from the sale of around 15 million of such preferred shares from February 14 to 25. The preferred shares are targeted for listing on the PSE by March 3.
Preferred shareholders have a higher claim on the assets and earnings of a company compared with the common shareholders. Preferred stocks are typically prioritized in terms of dividend payouts but these shares usually do not have voting rights.
Similar to the tack taken by its parent, San Miguel Corp., the offering of preferred shares targets investors who would like to have an assured dividend yield by holding on to debt-like instruments rather than investing in outright equity.
Apart from expanding its core food businesses, SMPFC earlier announced it may diversify and participate in the higher yielding but capital-intensive industries undertaken by its parent company, San Miguel.
Investment house ATR KimEng Capital Partners Inc. is acting as SMPFC's financial adviser on this offering. The joint issue managers and joint lead underwriters are BDO Capital and Investment Corp., HSBC Ltd., RCBC Capital Corp., SB Capital Investment Corp. and Standard Chartered Bank.
SMPFC earlier reclassified about a fifth of its authorized capital stock from common to preferred shares to allow the local food giant to raise fresh funds from the sale of these hybrid instruments. Likewise approved was the denial of preemptive rights to existing shareholders, giving the company leeway to sell the preferred shares to the public.
The company currently has an authorized capital stock consisting of 246 million common shares. The charter amendment has allowed SMPFC to reclassify 40 million of those common shares into preferred shares.