SMC presents capital-building plan to stockholders Thursday
San Miguel Corp. embarks on the biggest capital-raising in the Philippine stock market, targeting retail investors with no other investment outlets other than the Bangko Sentral ng Pilipinas’ special deposit accounts or government bonds.
MANILA, Philippines—San Miguel Corp. will ask stockholders on Thursday to ratify a capital-building strategy that includes a plan to offer a new series of preferred shares worth as much as P80 billion by the third quarter of this year.
In a disclosure to the Philippine Stock Exchange on Wednesday, SMC confirmed plans to issue a new series of preferred shares and boost its authorized capital, thereby supporting further expansion and diversification plans.
SMC plans to raise its authorized capital to P30 billion from the current P22.5 billion through an increase in common shares by 400 million to 3.79 billion, and issuance of a 1.1-billion new series of preferred shares with a par value of P5 per share.
Industry sources said SMC was planning to offer by August as much as P80 billion worth of preferred shares to refinance the P72 billion worth of preferred shares that were issued to stockholders—including the government—and that converted their common shares to preferred stocks in 2009. If issued at the maximum offer size of P80 billion, this will be the single largest tranche of capital market activity in the country, exceeded only by the the Bureau of Treasury’s Retail Treasury bonds (RTBs).
For this landmark offering, SMC is targeting retail investors that have no other investment outlet except the Bangko Sentral ng Pilipinas’ special deposit accounts (SDAs) or government bonds. The shares will be listed on the PSE.
“The issuance of a new set or series of perpetual preferred shares would be advisable to finance the redemption of the Series 1 shares as it would enable SMC to potentially reduce cost of capital,” said Jose Mari Lacson, head of research at Campos Lanuza & Co.
“At 8 percent (per annum) cost of capital for the preferred shares is very expensive. The only concern is if SMC plans to redeem the preferred shares in whole with the issuance of new preferred shares of equal size, can the markets absorb the capital-raising exercise at a minimum of P72 billion? There’s a chance it’s simply too big and too soon after BDO’s stock rights offering. We most likely will see a Series 1 redemption of a smaller magnitude,” he said.
Tycoon Henry Sy’s Banco de Oro Unibank is likewise raising within this month $1 billion from a stock rights offering.
Sources privy to the exercise, however, said SMC would attempt to refinance the old series of preferred stocks in a single tranche. They say the timing of its offering is favorable in the third quarter given that there will be P70 billion maturing RTBs by August and September this year on top of the large pool of funds under the SDAs.
The first series of preferred stocks, which targeted shareholders that would like a fixed return instead of sharing in the risks from SMC’s diversification, were issued at P75 per share in 2009.
The conglomerate has been diversifying out of its traditional food-and-beverage businesses in the last few years. It has entered the power, oil, toll-road, mining, airport and telecommunications businesses, and, most recently, bought a substantial stake and management control of flag carrier Philippine Airlines in a $500-million buy-in deal. It sold a controlling stake in Bank of Commerce to Malaysian banking giant CIMB.
