By Arra B. Francia, Reporter

SAN MIGUEL CORP. (SMC) is consolidating its beverage businesses under San Miguel Pure Foods Company, Inc. (SMPFC) through a P336.35-billion share swap deal.

In a disclosure to the stock exchange on Monday, the diversified conglomerate’s wholly owned subsidiary SMPFC said its board of directors approved in a meeting last Nov. 3 the change in its corporate name to San Miguel Food and Beverage, Inc.

The move is in line with the transfer of SMC’s liquor and brewery businesses, through Ginebra San Miguel, Inc. (GSMI) and San Miguel Brewery, Inc. (SMB), under the umbrella of SMPFC, whose businesses include feeds, poultry, fresh meat, milling, and branded food such as Purefoods canned goods, Magnolia ice cream and San Mig Coffee.

The company said its primary business, as stated in its articles of incorporation, will also be changed to include its alcoholic and non-alcoholic beverage business.

For the transaction, SMC will be subscribing to 4.242 billion common shares with a par value of P1 each in SMPFC. This will be taken from an increase in SMPFC’s authorized capital stock by P9.54 billion, divided into 9.54 billion common shares with a par value of P1 each.

SMPFC’s current authorized capital stock stands at 2.06 billion common shares with a par value of P1, plus 40 million preferred shares with a par value of P10 each. Once the company secures approval from the Securities and Exchange Commission (SEC) for the increase, it will have an authorized capital stock of P12 billion, split into 11.6 billion common shares at P1 each and 40 million preferred shares with a par value of P10 per share.

SMC’s subscription to new shares is valued at P336.35 billion, according to the independent expert report of the transaction’s adviser, ING Bank N.V.

In turn, SMPFC will be acquiring P336.35 billion worth of SMC’s shares in both GSMI and SMB as payment for the transaction. This consists of 7.859 billion common shares in SMB and 216.97 million common shares in GSMI.

SMPFC noted the new shares will also be listed at the Philippine Stock Exchange, following approval from both the bourse and the SEC.

As a result of the transaction, SMC, SMPFC, and GSMI all went under a one-hour voluntary trading halt on Nov. 6 to allow investors to digest the material information.

SMPFC will be holding a special stockholders’ meeting on Jan. 18, 2018 to secure approval from its shareholders to amend its articles of incorporation.

Following the announcement, shares in SMPFC soared by 50% or P154 after Monday’s trading to P462 each, while shares in SMC added P5.50 or 5.43% to P106.80 each.

Asked how the move will affect both companies, PNB Securities Inc. President Manuel Antonio G. Lisbona said it represents a realignment of SMC’s portfolio.

“The move represents a realignment of SMC’s portfolio, resulting in (SMPFC) now being a food and beverage company and the latter may now focus on its infrastructure business,” Mr. Lisbona said in a text message.

For his part, Timson Securities, Inc. equity trader Jervin S. de Celis said this is a strategic move by SMC to capture opportunities in the consumer sector.

“SMC is a very diversified firm and they are tapping the growth in the consumer sector by combining its companies in the same industry which will unlock more economic benefits for the company and may further improve their financial performance especially when the tax reform gets implemented,” Mr. Celis said.

Meanwhile, SMC will be asking the Bureau of Internal Revenue for a tax free ruling on the share swap, as well as a non-application from the Philippine Competition Commission for its approval to proceed with the transaction.

“On the face of it, the move provides value to (SMPFC) and its effects on SMC will be minimal, since it owns (SMPFC), SMB, and GSMI. The next hurdle will be to obtain a tax-free ruling on the share swap as well as a green light from the Philippine Competition Commission,” Mr. Lisbona said.

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