Cojuangco sells 15% SMC stake to allies

MANILA, Philippines—Eduardo “Danding” Cojuangco Jr. completed on Friday the sale of his 15 percent interest in conglomerate San Miguel Corp. to trusted allies led by Ramon S. Ang for P37 billion, the tycoon announced.

This developed as SMC’s controlling stockholder group, Top Frontier Investment Holdings Inc., partially exercised an option agreement signed in 2009 to acquire Cojuangco’s 493.37 million shares at P75 per share.  The SMC chair assigned to Ang the rest of the shares not taken up by Top Frontier.

With this transaction, Ang will become the single biggest stockholder of SMC with 11 percent interest. He will control three out of the company’s 15 board seats. But the 77-year-old Cojuangco will remain chair and chief executive officer of SMC “for life,” Ang said.

Based on outstanding number of shares of SMC, the Cojuangco bloc had a 15 percent interest in SMC equivalent to 20.8 percent of voting rights based on share of outstanding common shares.

In a press statement, Cojuangco announced he had assigned the 11 percent stake to Ang, whom he described as “a person in whom I have full trust and confidence and rightfully deserves utmost recognition for transforming the company into a highly diversified and profitable business conglomerate.”

“From the time I requested Ramon to join me in the company, he has continuously dedicated 100 percent of his time and effort in ensuring the growth of the San Miguel Group to the benefit of its shareholders,” Cojuangco said.

The sale of Cojuangco’s shares was consummated on Friday via cross transactions at the Philippine Stock Exchange.

Asked about the matter, Ang said in a text message that he was given by Cojuangco “new and friendly terms” for the block he had personally taken up.

As Top Frontier decided to only partially exercise the option to buy the entire Cojuangco bloc, Ang said the balance was offered to him.

“And I accepted primarily for the following reasons: the San Miguel vision set by management during my term is far from being achieved, and; I have a continuing commitment to ECJ, the company’s stakeholders and the employees to see through the realization of this vision in the near future,” Ang said.

Top Frontier held the option to buy Cojuangco’s 493.37 million common shares at P75 per share. This holding firm had the option to buy out these SMC shares until Nov. 19, 2012.

After the Supreme Court upheld earlier this year Cojuangco’s ownership of a significant stake in the conglomerate, the tycoon was technically free to sell his shares, as intended. Such ruling removed the political overhang that had hounded SMC since the 1986 People Power Revolution when the government claimed that Cojuangco’s interest in SMC was acquired using coco levy funds when he headed United Coconut Planters Bank.

Top Frontier is 49-percent owned by SMC itself as represented by Ang and 51-percent controlled by an investor group that includes former Trade Minister Roberto V. Ongpin, Iñigo Zobel and condiments king Joselito Campos. It was given “continuing” and “exclusive” option to purchase and acquire Cojuangco’s shares.  And even when Top Frontier had yet to exercise such option, the agreement already gave it voting rights to Cojuangco’s shares, making it the single most influential voting bloc in SMC.

Cojuangco’s exit as an owner from SMC is deemed as part of the tycoon’s estate planning similar to the route taken by some retiring American tycoons who cashed out their controlling stake in the big companies they had founded in order to distribute proceeds to heirs upon retirement but at the same time making sure that management would be inherited by people deemed most fit to continue running the company.

“There is no other person deserving of this opportunity to control a significant stake in the company that is so close to my heart than Ramon. San Miguel has made a distinctive impact because of him and he cares about the Company and its people. I am confident he will lead San Miguel to further greatness,” Cojuangco said.

“With Ramon at the helm, I now have the luxury of devoting more time to my personal endeavors, though I will continue to oversee and participate in the unending commitments of SMC to make everyday life a celebration, maintain business excellence, further enhance shareholder value, and become a partner in the country’s growth story.”

Under Cojuangco’s leadership, which began in 1998, San Miguel built up a pile of cash that funded a wave of local and overseas mergers and acquisitions, allowed the entry of Japan’s beer giant Kirin Holdings as a strategic partner initially in San Miguel and later in the spun off flagship unit San Miguel Brewery. His management also marked SMC’s diversification into capital intensive but potentially higher yielding heavy industries.

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