SMC raising $2 billion for energy venture

MANILA, Philippines - San Miguel Corp. is trimming its stake in its food and packaging units to further build up its war chest in preparation for a $2 billion acquisition for future growth and to further strengthen its balance sheet.

San Miguel president and chief operating officer Ramon S. Ang said the conglomerate, which has been diversifying away from food and beverage operations into power, telecommunications, infrastructure and mining, is in talks with several groups for the possible sale of a portion of its packaging and food businesses as it sets its eyes on an unnamed energy company with an equity value of around $2 billion. “We’re expecting some major acquisition soon. It’s a big acquisition. You’d be surprised we’re going into this,” Ang said.

Ang said San Miguel is looking to acquire 60 percent of the unnamed energy company, which he said has a very “strong cash flow.” 

Ang said Japan’s Nihon Yamamura Glass has signified interest to increase its stake in San Miguel Yamamura Packaging Corp. to 49 percent from 35 percent. The additional 14-percent stake has an enterprise value of $100 million.

He said the group has received offers from several investors for its food business, which is worth $1.8 billion.

San Miguel is seeking shareholders’ approval to sell more than 51 percent of core businesses and create a common stock as it sees to fuel its aggressive push into heavy industry.

“We’re looking for new investments that will present better returns for us,” Ang said.

Ang said the group is interested in bidding for PNOC-EC and the Malampaya oil development.

At present, San Miguel is in talks to buy stakes in railways, toll roads, airport projects and coal mines. Last month it said it was studying the feasibility of building a bullet train that would run across the main Luzon island.

San Miguel began divesting some of its businesses in 2007 to fund its massive diversification program.  Among these deals included the sale of its 65 percent stake in the Philippine unit of Coca-Cola Co for $590 million, and the sale of 43.3 percent of its flagship San Miguel Brewery Inc to Japan’s Kirin Holdings for $1.3 billion.

Its investment portfolio currently includes a joint venture with Qatar Telecommunications Co, a stake in power distributor Manila Electric Co, and an option to take a controlling stake in oil refining giant Petron Corp.

Ang said the group is holding on to its investment in Meralco even as it doesn’t own a controlling stake in the power utility giant. “We’re keeping our shares in Meralco. 

He said San Miguel’s core earnings are expected to grow 30 percent this year