SMC raising P20B to prop up virus-battered units

Food, beverage and infrastructure conglomerate San Miguel Corp. (SMC) plans to increase its stake in its core subsidiaries amid the business downturn triggered by the COVID-19 pandemic.

SMC is raising up to P20 billion next month from a preferred share sale to pump in additional investments in its companies such as San Miguel Food and Beverage Inc. and Petron Corp., whose market values have significantly declined during the health crisis.

In a stock exchange filing on Wednesday, SMC said the sale would involve 133.33 million shares, with an option to double the offer size to 266.66 million shares, at P75 apiece.

The offer accounted for half of the 533.3 million Series 2 preferred shares filed under a shelf registration with the Securities and Exchange Commission.

A shelf registration allows a company to stagger the sale of securities over a period of time, especially when market conditions are volatile.

In its prospectus, SMC said shares would be offered to local investors from Sept. 29 through Oct. 9 this year. The shares would be listed on the Philippine Stock Exchange on Oct. 20.

With overallotments, net proceeds could hit P19.88 billion.

SMC said the money would be used to invest “by way of equity” in subsidiaries such as San Miguel Food and Beverage, Petron, SMC Global Power Holdings Corp., San Miguel Holdings Corp. and San Miguel Properties Inc.

Moreover, the company’s board of directors authorized management to make these added investments considering their funding needs, possible business opportunities and the requirements of regulators.

SMC said the preferred shares are nonvoting, nonconvertible and nonparticipating.

The offer is being arranged by BDO Capital & Investment Corp., BPI Capital Corp., China Bank Capital Corp., Philippine Commercial Capital Inc., PNB Capital and Investment Corp., RCBC Capital Corp. and SB Capital Investment Corp.

SMC is one of the largest and most diversified conglomerates in the Philippines by revenue and total assets.

Its sales accounted for 5.5 percent of the country’s gross domestic product last year. Just like other businesses in the country and the world, SMC was affected by the pandemic.

“The COVID-19 pandemic has, and is expected to continue to have, an adverse effect on the company’s businesses and results of operations,” SMC said in its prospectus.

It added that “continuing adverse impacts” were likely to persist beyond the third quarter of 2020.

To help cope with the crisis, SMC launched a new online ordering system and has tapped e-commerce sites and logistics companies to sell its products.

SMC earlier reported a net loss of P4 billion in the first semester of 2020, reversing a P26.15-billion profit in the same period last year. Total revenues sank by 31 percent to P352.8 billion.