Still a ‘go’: San Miguel vows to press ahead with IPO despite valuation slash

24-Oct-2018 - Last updated on 24-Oct-2018 at 01:30 GMT

SMFB was previously known as San Miguel Pure Foods before restructuring. ©San Miguel

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The boss of San Miguel Food and Beverage (SFMB) has vowed that the firms planned IPO will go ahead, despite its value being slashed by roughly 50% to US$920mn (PHP 49.4bn) as a result of weak market conditions.

This number does not include and an overallotment option, which could go up to 15% of the offering.

According to a regulatory filing to the Philippine Stock Exchange (PSE) last week, San Miguel looks to sell 523 million shares at 85 pesos (US$1.58) to 95 (US$1.77) pesos per share.

Previously, the share price was estimated at 140 pesos (US$2.61) per share.

The final offer price will be set within this week.

Proceeds from the share sales will be invested in the business, although further details were not revealed.

Despite this slash, San Miguel President and CEO Ramon Ang has assured the public that the planned share sale will still proceed in compliance with the PSE 10% minimum public ownership requirements.

“It is definitely a go,” said Ang to Manila Standard.

“We are sure to comply with the minimum public ownership requirement. So we are definitely going out.”

“Prices are lower because of strong US economy which is bringing out all money (sic).”

AP Securities, Inc. research analyst Rachelle C. Cruz told BusinessWorld: “Given market conditions, they cut the offer because it’s either the demand was low and they need to price it at a big discount or they might do another round of offering when market conditions are better and prices and people are able to absorb higher offer price.

"With uncertainties here, with liquidity not as what market was in January, it is a challenge for San Miguel so they decided to reduce the shares," said another financial expert, Rizal Commercial Banking Corp trust trading head Helen Go Oleta to Business Standard.

SMFB is the consolidated food and beverage unit of Philippines conglomerate San Miguel Corp (SMC). It leads the Philippines market in beer, branded processed meat products, butter, gin and fresh meat.

Restructuring and growth

The sale of a minority stake in SMFB is part of SMC’s overall restructuring plan announced back in August 2017.

Earlier in August this year, SMC announced that it would be selling 1.2 billion SMFB shares in what is expected to be the Philippines’ biggest ever equity offering, despite the 50% cut. The largest equity transaction previously was by LT Group Inc. at PHP38bn (US$707mn) back in 2013.

“We advise that, at the regular meeting of the board of directors of San Miguel Corporation held today, August 9, 2018, the board of directors of the Corporation approved the sale of up to 1.2 billion common shares of San Miguel Food and Beverages Inc. (SMFB) through a public offering,” said SMC.

SMC also reported a 29% increase in recurring net income to PHP 35.5bn for the first six months of 2018, as consolidated revenues reached PHP 499bn, a 27% increase year-on-year.

For SMFB, combined sales revenues first half of 2018 totalled PHP 137.4bn, a 15% growth year-on-year.

Additionally, SMFB also revealed plans to plough resources into building new company-owned production facilities in the Philippines, as part of an effort to increase production and boost exports.

“[SMFB] plans to transition from tolled to company owned facilities to optimize efficiencies and enhance production capabilities,” said the company.

Planned facilities will benefit the company’s fresh foods, feed, prepared and packaged food, beer and flour segments.