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Regulator to look into minority shareholder’s complaint vs SMC

BusinessWorld logo BusinessWorld 9/11/2018
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By Arra B. Francia, Reporter

THE Securities and Exchange Commission (SEC) has formed a special panel to investigate a complaint filed against San Miguel Corp. (SMC) and its subsidiaries for allegedly violating the mandatory tender offer rule prior to the merger of its traditional businesses.

Josefina Multi-Ventures Corp., a minority shareholder of SMC unit Ginebra San Miguel, Inc. (GSMI), said in a petition submitted to the SEC that SMC should have conducted a tender offer to all minority owners of the company before pushing through with the share swap transaction that would merge San Miguel Pure Foods, Inc., San Miguel Brewery, Inc., and GSMI under San Miguel Food and Beverage, Inc. (SMFB).

“The commission formed a special hearing panel to resolve the issue raised by Josefina,” Armando A. Pan, Officer-in-Charge of the SEC Office of the Commission Secretary, said in a mobile message.

SMC said in a disclosure to the stock exchange on Tuesday that it has received a summons and amended petition in relation to the case.

“SMC shall file its answer to the petition conformably with the 2016 Rules of Procedure of the SEC,” the diversified conglomerate said.

Josefina Multi-Ventures, which described itself as a GSMI shareholder since 2014 and holds a total of 1.84 million shares, said SMC should have made the tender offer after acquiring around 75% of SMFB.

Citing Section 19.2 of the Securities Regulation Code, the company said a tender offer is required once a person or group of persons acting in concert acquire at least a 35% stake in a listed company.

“Clearly, the basis for the application of the mandatory tender offer rule is purely quantitative; once the threshold of 35% is reached, a tender offer is required under the law,” Josefina Multi-Ventures said in its petition.

“In this case, if the tender offer rule is not applied, GSMI minority stockholders will have no other alternative than to simply accept the share swap transaction between SMC and SMFB,” it added.

The petitioner also questioned the SEC’s ruling that the tender offer rules do not apply to the transaction since it involves a de facto merger or consolidation, wherein the change in control will only result to indirect from direct.

Josefina Multi-Ventures noted that control did not shift from direct to indirect, since SMC and SMFB are two completely different entities.

“Properly considered, the share swap transaction subject of this case only contemplates the transfer of SMC’s GSMI shares to SMFB in exchange for the latter’s shares of stock. Clearly, SMC is not merging with SMFB, and neither are these two corporations consolidating into a new single corporation,” according to the petition.

Josefina Multi-Ventures is now asking for the nullification of the share swap between SMFB and SMC. It is asking that SMFB be directed to conduct a mandatory tender offer for the benefit of the minority shareholders of GSMI.

The complaint could put a halt on SMFB’s planned P142-billion follow-on offering this year, which should bring the company’s public float to the minimum 10% from its current 4.12%.

Shares in SMFB were unchanged at P94 each at the stock exchange on Tuesday, while SMC shares lost 1.08% or P1.90 to close at P174 apiece.

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