Kirin strengthen's hold on San Miguel

MANILA - Japan's Kirin Brewery Co, controlling shareholder of Lion Nathan, strengthened its alliance with Philippine food and drinks firm San Miguel Corp yesterday, spending US$156 million ($227m) to raise its stake to nearly 20 per cent.

Analysts said the deal could help San Miguel Chairman Eduardo Cojuangco keep his grip on the company, which has been threatened by share ownership disputes with the government.

A planned rights offering by San Miguel in the first quarter would give Kirin and other shareholders allied with Cojuangco, such as mall magnate Henry Sy of SM Prime Holdings Inc, another chance to raise their stakes in the firm, analysts said.

San Miguel, Southeast Asia's largest food and beverage firm, said Kirin bought 117.43 million San Miguel B shares at 75 pesos each, equivalent to a 4.12 per cent stake, from the San Miguel Corp. Retirement Plan.

San Miguel is locked in a battle with New Zealand dairy group Fonterra for control of Australia's National Foods. On December 30 San Miguel trumped Fonterra's A$5.45 a share bid with a A$6.00/share offer.

Yesterday's deal, which represented a 5 per cent discount to San Miguel B share's closing price of 79 pesos on Monday, raised Kirin's stake to 19.67 per cent.

"This further raises his (Cojuangco's) effective control of the company because his ally has a bigger interest," said Alex Pomento, head of research at Macquarie Securities (Philippines) Inc.

"It's a formidable partnership." In a statement, Kirin said it saw San Miguel as the best partner with which to "exploit business opportunities and bring synergies among Kirin group companies in the region."

Jose Vistan, analyst at AB Capital Securities, said Kirin's purchase was a vote of confidence in San Miguel "from an insider who is familiar with the company's fundamentals."

San Miguel, established in 1890 as a small brewery, dominates its home market in beer, liquor, soft drinks, food and poultry products. It has over 100 facilities in Southeast Asia including the Philippines, Australia, and China.

The country's anti-graft court ruled late last month that the government owned a disputed 27 per cent stake in San Miguel.

The government has also confiscated a separate 20 per cent block of shares from Cojuangco, but the tycoon still has voting rights on that stake.

The government assumed the stakes in 1986 on suspicion they were acquired through the ill-gotten wealth of the late dictator President Ferdinand Marcos, who was ousted from office that year in a popular revolt.

Pomento said that even if the cash-strapped government decides to sell the 27 per cent block to a strategic investor, Cojuangco was unlikely to be voted out as company chief executive due to the stakes held by his allies.

Another analyst said a planned rights issue, expected to consist of 213 million San Miguel A shares and 112 million B shares, should raise about 21 billion pesos based on Monday's closing prices -- equivalent to about 10 per cent of San Miguel's outstanding shares.

Vistan said he believed Kirin would buy more shares in the rights offering to at least maintain its stake in San Miguel, while the government's stake is likely to be diluted since it is unlikely to participate in the offer.

The firm's A shares, restricted to local investors, ended 1.68 per cent lower at 58.5 pesos ($1.50).

- REUTERS