Local beer brands sale to fund San Miguel’s debt, acquisitions

MANILA, Philippines - San Miguel Corporation, Southeast Asia largest food and beverage conglomerate, said Thursday that proceeds from the sale of its brewery unit would finance its debt and future acquisition activities. In a disclosure to the Philippine Stock Exchange, SMC said the move is part of the company’s restructuring program and it expects the transaction to be completed by April this year. In July last year, shareholders of the SMC allowed its major subsidiaries to pursue a public listing, secondary offering and strategic partnerships following the public offering of San Miguel Brewery. San Miguel tapped FortmanCline as the financial advisor on the valuation of the brands. “The consideration for the lands will be based on appraised value," it said. In a separate disclosure, San Miguel Brewery said the buyout is a strategic initiative to secure the company’s main competitive advantage, as it needs full control over the brands. It added that the acquisition will be financed through borrowings. “[San Miguel Brewery] will become brand owner and would be able to maximize the use of existing brands and, at the same time, develop its own brands that would cater to varied consumer needs," it said. In the foreseeable future, brewery firm said the brand ownership would ensure that margins can be maintained and improved over the long-term as the company would no longer pay royalties to San Miguel. As to land acquisition, the company said it is purchasing the lands where major investments are located. “Such acquisition would also allow the company to efficiently expand facilities, increase plant capacities, and improve distribution capabilities to address growing sales volumes," San Miguel Brewery said. The company engaged a financial advisor, UBS, to perform a valuation study and analysis on the domestic beer brands. Last year, San Miguel formed Brewery Properties Inc. and Iconic Beverages Inc. as part of its restructuring program. Earlier this month, Kirin Holdings Co. Ltd. said it entered into exclusive negotiations with SMC to buy a 43.25-percent stake in San Miguel Brewery. Kirin held 27 percent of San Miguel at end-December last year. San Miguel Brewery produces beer at five manufacturing facilities in the Philippines for sale in the local market. Last year, San Miguel offered 5.75 percent of its shares in its domestic brewing business in an initial public offering. In the first nine months last year, the conglomerate¹s profit rose on the back of non-recurring gains from SMB¹s maiden share sale. For the same nine-month period, SMB posted a 10-percent growth in revenues to P35.2 billion, resulting in a net income improvement of 23 percent to P7 billion year-on-year. - GMANews.TV