San Miguel buys back gov’t stake for P57.6B

San Miguel Corp. on Friday bought the government’s stake equivalent to 24 percent of its outstanding shares for P57.6 billion using proceeds from a recently completed landmark capital-raising exercise.

The government’s exit as a key voting block in SMC marked the end of an era in the diversifying conglomerate, which in the past was prone to political volatility. The government can now use the proceeds to help fund programs benefiting the local coconut industry and farmers.

SMC paid the Coconut Industry Investment Fund (CIIF) P57.6 billion for the redemption of its series 1 preferred shares. SMC chair Eduardo Cojuangco Jr. on Friday formally turned over the checks to CIIF president Jesus Arranza, who was authorized to receive the payment on behalf of the CIIF’s 14 holding companies.

“We have achieved our objective of giving to the coconut farmers and the industry the means for them to regain their competitiveness through the use of these funds,” Cojuangco said.

The CIIF said it believed this would help the coconut industry thrive as funds would be channeled toward research and development projects as well as livelihood programs for the coconut farmers. “These funds come at the most opportune time for the farmers as we have to prepare the coconut industry against competition coming from palm oil,” Arranza said.

“With palm oil growing in popularity and demand, we need to create a niche for coconut products in the higher value-added segment. That way, we will be able to sustain the coconut industry for the long term and provide better, more stable income to the farmers,” he added.

The SMC board recently redeemed the government-owned preferred shares representing the entire CIIF block. The P57.6 billion included not only the proceeds from the redemption of the preferred shares but also dividends dating back to 1984.

The Supreme Court ruled that the shares and all dividends accruing thereon were owned by the government and were to be used exclusively for the benefit of the coconut farmers and for the development of the coconut industry.

When the government agreed to convert its common shares in SMC to non-voting preferred shares in 2009, it gave SMC the option to redeem those shares. This option was exercised by SMC using proceeds from the P80-billion offering of a new series of preferred shares—the largest capital market foray in the country to date.

Earlier this year, Cojuangco also completed the sale of his 15-percent interest in SMC to the company president, Ramon S. Ang, and other trusted allies for P37 billion. With the transaction, Ang became the single biggest stockholder of SMC with an 11-percent interest.

Apart from its traditional food and beverage businesses, SMC now has interests in vital industries such as power, fuel and oil, infrastructure, mining, telecommunications, airlines and airports, among others—businesses which promise to bring in revenues amounting to about P1 trillion to the group by 2013.