CA upholds SEC ruling on Cemco tender

The Court of Appeals (CA) has junked the bid of Cemco Holdings to overturn an order of the Securities and Exchange Commission (SEC) to conduct a tender offer for the 45 million shares of publicly listed Holcim Phils., formerly the Union Cement Corp. (UCC). The appellate court’s special 10th division upheld the claims of the National Life Insurance Co. (NLIC), a minority stockholder of UCC, that the SEC has the primary and exclusive jurisdiction over its dispute with Cemco. It noted that Cemco’s petition lacks merit as to warrant a reversal of its October 24, 2005 ruling that ordered it to make a tender offer to National Life, which owns 45 million common shares of UCC. "After reviewing the arguments raised in the motion, we find that they have already been adequately discussed and passed upon in the decision, and there is no cogent reason for us to disturb its findings," the court said through Associate Justice Mario Guarina III. National Life had earlier asked the SEC to nullify the acquisition of shares of Cemco in UCC, as well as in Union Cement Holdings Corp., Bacnotan Consolidated Industries and Atlas Cement Corp. In its Oct. 24 ruling, the appellate court affirmed the SEC decision that favored National Life and noted that a tender offer would be "in the interest of fair dealing to the minority stockholders." It noted that with Cemco’s acquisition of the stocks of Union Cement Holdings, the firm became an indirect owner of UCC. "We are constrained, however, to construe ownership acquisition to mean both direct and indirect," read the Oct. 24 decision. Cemco acquired control of Holcim Philippines after it bought a 51% interest in Union Cement Holdings Corp., which owns majority of Holcim Philippines. Prior to acquiring control of the holding company, Cemco directly owned 17% of Holcim Philippines. Under the Securities Regulation Code, companies acquiring 15% of a publicly listed company must offer to buy the shares of minority shareholders. The tender offer trigger was later raised to 35% when the commission drafted the implementing rules for the law. The law, however, does not say if the tender offer applies only to direct acquisitions or if it also covers indirect acquisitions. Earlier, officials of Holcim Philippines said to require Cemco to hold a mandatory offer was bad for investments because it showed that SEC was changing the rules in the middle of the game. They said that before Cemco bought the 51% stake in Union Cement Holdings, it already asked the SEC and the Philippine Stock Exchange if it would need to conduct a tender offer for minority shareholders of Holcim Philippines. The SEC and the PSE had said the company need not conduct a tender offer since it would acquire control of Holcim Philippines indirectly. In the Feb. 14 ruling, however, the SEC said the tender offer requirement holds for both direct and indirect acquisitions, as the rationale behind requiring a tender offer is to protect investors. The Appellate Court said that the law gives "the shareholder of a listed company the opportunity to decide whether or not to sell in connection with a transfer of control." - Maria Eloisa I. Calderon with Jennee Grace U. Rubrico/Businessworld