San Miguel consolidating beverage businesses into Pure Foods

Conglomerate San Miguel Corp. is set to consolidate all traditional businesses into San Miguel Pure Foods Co. Inc. through a P336.35-billion swap of its shares in beer and other beverage businesses.

In a disclosure to the Philippine Stock Exchange on Monday, Pure Foods will be renamed as San Miguel Food and Beverage Inc. while its primary purpose will be changed to include production of alcoholic and non-alcoholic beverages.

Shares of Pure Foods surged by 50 percent – hitting the daily price movement ceiling – to close on Monday at P462 per share, giving it a market capitalization of P51.33 billion after the consolidation plan was announced.

Based on the transaction, SMC will subscribe to 4.24 billion additional common shares of Pure Foods out of new shares coming from an increase in authorized capital stock and 10:1 stock split.

The subscription by SMC to new shares in Pure Foods is worth around P336.35 billion, based on the independent valuation expert report of ING Bank NV.

As full payment for this subscription, SMC will transfer to Pure Foods its 7.86 billion common shares in beer unit San Miguel Brewery Inc. (SMB) and 216.97 million shares in Ginebra San Miguel Inc. (GSMI).

SMC, however, will have to file for tax-free ruling relating to the exchange of SMB and GSMI common shares for the new shares. It will also notify the Philippine Competition Commission (PCC) about this transaction.

In line with the planned change in bylaws of Pure Foods, which has been approved by its board, the par value of its common shares will be reduced to P1 each from P10 each. The company will seek the right to deny preemptive rights for issuances or dispositions of common shares.

Pure Foods’ authorized capital will be increased to P12 billion divided into 11.6 billion common shares with par value of P1 each and P40 million preferred shares with par of P10 each. At present, its authorized capital stock stood at only P2.46 billion.

“The amendments to the primary purpose and corporate name will result in the company being authorized to engage in the beverage business, and representing itself to the public as now being a food and beverage corporation,” the disclosure said.

The reduction in par value will result in the common shares being split into 10 common shares for every one common share of Pure Foods’ authorized capital stock.

“After the SEC approves the amendments to deny pre-emptive rights for issuances of common shares and reduce the par value of common shares, and the company’s authorized capital stock is increased, it can and will have enough common shares to issue to SMC for the share swap transaction, as well as conduct a subsequent follow-on share offering to comply with the minimum public ownership requirement of the exchange,” the disclosure said.

If required, Pure Foods plans to comply with the requirement to make a tender offer for shares held by the minority shareholders of SMB and GSMI.

Pure Foods has called for a special stockholders meeting on January 18 to ratify the transaction alongside changes in bylaws needed to proceed with this transaction.