DIVERSIFIED conglomerate San Miguel Corp. (SMC) will have to conduct a tender offer to minority shareholders of Holcim Philippines, Inc. (HPI) in relation to its $2.15-billion acquisition of the listed cement manufacturer.
SMC disclosed on Friday that it will acquire 5.531 million common shares in HPI, representing 85.73% of the company’s total outstanding and issued capital stock.
The acquisition will be made through First Stronghold Cement Industries, Inc., a wholly-owned unit of SMC’s subsidiary San Miguel Equity Investments, Inc.
“As a result of the Transaction, the Purchaser is required to conduct a tender offer of the shares of HPI held by its minority shareholders who hold 14.27% of the total issued and outstanding capital stock of HPI,” SMC said.
SMC said it plans to request for exemptive relief with the Securities and Exchange Commission (SEC) to allow the tender offer to be conducted after the final purchase price has been determined and paid.
The company said the purchase price was negotiated and determined based on the valuation of HPI’s business through a discounted cash flow method, “as well as other methodologies customary for transactions of this nature.”
The $2.15-billion purchase price is also inclusive of fees for transitional service arrangements.
In a separate statement, HPI’s parent LafargeHolcim said it expects to close the transaction by the fourth quarter of 2019 and is seen to improve its debt ratio by around 0.3 times.
The group’s sale of its Philippine assets follows its divestment from Indonesia, Malaysia, and Singapore, worth a total enterprise value of $4.9 billion.
“With the divestment of our activities in the Philippines, we are completing our exit from the increasingly hyper competitive arena in South East Asia. While this decision is based on our strategic portfolio review, we have reached very attractive valuations allowing us to achieve a new level of financial strength,” LafargeHolcim Chief Executive Officer Jan Jenisch said in a statement.
The transaction also require the approval of the Philippine Competition Commission (PCC), as it exceeded the transaction value of mergers and acquisitions that should be reported.
“The PCC has not yet received the notification by San Miguel Corp or Holcim / LaFarge Philippines for mandatory review. The parties have 30 days after signing of their definitive agreement to submit the notification,” PCC Chairman Arsenio M. Balisacan said in a text message on Friday.
“The transaction shall be treated as a separate review given our ongoing enforcement case in the cement industry.”
Shares in SMC dropped 2.81% or P5.50 to close at P190 each at the stock exchange on Friday, while shares in HPI jumped 6.10% or 88 centavos to close at P15.30 apiece. — Arra B. Francia with input from Janina C. Lim