Is San Miguel Brewery slowly turning Japanese?

(Updated) MANILA, Philippines - Kirin Holdings Co., Ltd., which sells two of Japan’s most popular beers, may plan to acquire stakes in the overseas beer businesses of San Miguel Corp. (SMC). This much was indicated by the Japanese brewer in its website, hours after San Miguel agreed to sell nearly half of its stake in its beer unit – San Miguel Brewery Inc. (SMBI) – to Kirin. The same sale agreement also includes a provision allowing SMBI and its parent to exclusively negotiate for the purchase of shares in SMC’s overseas beer business for a six month period. “The exclusivity will be in effect for six months after SMC’s announcement of its intent to sell the shares in its overseas beer business. Detailed review will be initiated once SMC makes official announcement for such sale," Kirin said in a statement posted in its website. For its part, a San Miguel source said that the company still has no ready information about Kirin's plans. It may take awhile before Kirin can buy into SMBI, if it really intends to, the source said. Previously Japan’s leading brewer, Kirin is aggressively pursuing a strategy to become a leader in Asia and Oceania. SMC has breweries in Indonesia, Thailand, Vietnam, North and South China, and Hong Kong. Earlier, San Miguel signed a share purchase agreement with Kirin, allowing it to acquire 43.249 percent stake in SMBI for P58.9 billion or a share price of P8.841 each, the company said in a disclosure to the Philippine Stock Exchange (PSE). SMBI’s shares on Friday closed 7.2165-percent lower at P9 each. However, before completing the acquisition, Kirin will make a tender offer to purchase additional shares from all other existing SMBI shareholders at the same purchase price offered it offered to SMC. SMBI produces and markets San Miguel Pale Pilsen, Red Horse, San Mig Light, and five other affiliated brands. The alliance between SMC and Kirin “will create exciting opportunities on multiple fronts for our brewery business," Ramon S. Ang, San Miguel president and chief operating officer said. “We need a strong partner for our brewing business particularly as San Miguel begins to branch out into other industries, and I am confident that as a result of Kirin's direct buy-in, our beer products will see higher sales and even better efficiencies going forward." Kirin has been an equity partner of San Miguel since December 2001 when it bought 15 percent of SMC’s newly-issued shares. Four years later, the Japanese company increased its SMC holdings to 19.7 percent after acquiring the stake of the SMC’s retirement plan. Through Kirin's buy-in into SMBI, Kirin and San Miguel plan to reinforce their relationship in the regional beer business, accelerating the creation of synergies between the two companies. Next: Stake sale exempted from rules covering foreign ownership limits, SMC says Stake sale exempted from rules covering foreign ownership limits, SMC says San Miguel's decision was no indication that it is exiting from its beer business, analysts said. "I don't think San Miguel will exit its beer business, it's the crown jewel of the company," said Claire Quiray, analyst at Accord Capital Equities. Although San Miguel and Kirin made the agreement for the 43.25-percent stake in SMBI, the parties may be forced to amend the agreement during the actual purchase owing to the 40-percent foreign ownership restriction of Filipino companies, she said. San Miguel sources defended the agreement, saying the transaction “does not include land ownership so it was not covered by the 60-40 foreign ownership rule." Since the announcement of its plan to diversify into heavy industries some two years ago, San Miguel is now second-largest shareholder of power distributor Manila Electric Co. It is seeking to be the majority owner of Petron Corp., the country’s largest oil refiner, within two years. San Miguel has also partnered with a Qatari firm for telecommunications venture. A subsidiary, San Miguel Bulk Water Co. Inc. has also submitted an unsolicited proposal to the government to construct the P38.8-billion Laiban Dam project. Next: Beer unit undertakes bond sale, by far the Philippines’ largest Beer unit undertakes bond sale, by far the Philippines’ largest Earlier, San Miguel Brewery filed its registration to sell multi-billion bonds, a transaction seen as the country’s largest bond offering. In submitting its bond sale registration to the Securities and Exchange Commission (SEC), SMBI said that it plans to sell some P20 billion worth of bonds. The transaction contains an oversubscription option worth P18.8 billion. The bonds have a term of three, five and seven years. Earlier this month, SMBI’s board approved the issuance of the peso or dollar bonds or both. The bond, which is seen as the country’s biggest ever bond offer, will pay for the beer brands, intellectual property rights and property from San Miguel. San Miguel has disclosed that it would sell the beer brands worth P32 billion and land on which the breweries stand at P6.8 billion to SMBI. SMBI had appointed UBS as its financial adviser and that the transactions are expected to be completed by April. San Miguel president Ramon Ang has also been elected as chairman of listed Liberty Telecoms following the conglomerate’s announcement of its partnership with a Qatari firm for a telecommunications venture. - GMANews.TV