SMC rolls out P80B preferred shares offer

MANILA, Philippines-Conglomerate  San Miguel Corp. launched on Monday a retail offering of preferred shares worth as much as P80 billion, the single largest capital-raising activity in the country to date.

The public offering of the new series of SMC preferred shares will run until Sept. 14 while the listing on the Philippine Stock Exchange is targeted by September 28, a bookrunner said on Monday.

SMC is also set to hold a roadshow for Metro Manila investors on Tuesday, then moving on to Cebu on Wednesday and to Davao later in the week.

The Securities and Exchange Commission last week approved the registration of as much as 1.067 billion in new SMC preferred shares offered at an issue price of P75 per share.

The series 2 preferred shares will be peso-denominated, perpetual, cumulative, non-participative and non-voting and may be issued in sub-series or tranche.

The preferred shares will be offered at three sub-series redeemable starting the 3rd year, 5th year and 7th year and every dividend payment thereafter or SMC will otherwise pay a higher interest rate. Such “step-up” rate will be effective on the 5th, 7th and 10th year, respectively, if the shares are not redeemed by then.

Dividend rate per annum on the sub-series (2-A) that carries a step-up rate in five years is 7.5 percent and that on sub-series (2-B) with step-up rate on 7th year is 7.625 percent.  The sub-series that will have a step-up rate in 10 years will be paid a dividend rate of 8 percent per annum, the SEC documents said.

The dividend rates on SMC preferred shares were thus priced at 275 basis points higher than the benchmark local interest rate for the five-year and seven-year series and 300 basis points higher on the 10-year series, a bookrunner said.

Mandated as bookrunners for the offering were: HSBC, Union Bank, BDO Capital, China Bank, RCBC Capital, First Metro Investments Corp., ING Bank, Philippine Commercial Capital Inc., Standard Chartered Bank, SB Capital and United Coconut Planters Bank.

The base offer will comprise 960 million shares with an option to upsize by 107 million shares.

The preferred shares will be issued upon approval by the SEC of the increase in SMC’s authorized capital stock from P22.5 billion to P30 billion.

As earlier reported, bulk of the proceeds will be used to redeem all of SMC’s existing P72.8 billion series 1 preferred shares while the remainder shall be for general corporate purposes, including partial repayment of short-term debt.

In a prospectus issued on Monday, SMC believes that its principal strengths are the following:

* broad exposure to the growing Philippine economy.

* market leading positions in key local industries such as beverages, food, packaging, fuel and oil, energy and infrastructure;

* experienced management team;

* operating businesses that provide “sustainable” stream of income and cash flows; and,

* well-positioned platform for significant future growth.