San Miguel to acquire Ayala food unit

Cojuangco intends to boost SMC's stake in the food business by acquiring Ayala Group's Pure Foods Corp.

By CNN's Amabelle Layug in Hong Kong

MANILA, Philippines (CNN) -- Food and beverage giant San Miguel Corp is in final negotiations with the Ayala Group to acquire its food unit, Pure Foods Corp.

SMC spokesperson Art Cuevas said a definitive agreement outlining SMC's takeover of Pure Foods would be signed within the next few days.

The Ayala Group said it has set a May 15 deadline for the deal to be consummated.

Cuevas would not comment on the price. However, reports suggest SMC was able to close the deal at P7 billion ($138 million), much lower than the P15 billion sought by the Ayala Group.

SMC chairman and CEO Eduardo Cojuangco Jr. earlier said SMC would be able to start its takeover of Pure Foods by June.

"With its strong brand equity and franchise, we're confident that Pure Foods will prove to be another outstanding acquisition," Cojuangco said.

"Combined with Pure Foods, San Miguel will become the undisputed market leader in the country's fast-growing food industry, cornering two-thirds of the refrigerated and processed meat segment and over a third of the poultry and feeds business," he added.

SMC reportedly plans to use Pure Foods as the backdoor listing vehicle for its food group. The acquisition is also expected to boost SMC's stake in the flourishing noodle business by taking advantage of Pure Food's flour mills.

A successful deal will make Pure Foods SMC's fourth major acquisition since 2000. It has already picked up Sugarland Multi-Foods Corp. and premium Australian brewer J. Boag & Sons.

It is also currently working on a bid to regain soft drink leader Coca Cola Bottlers Philippines Inc.

Nothing to do with profitability

The Ayala Group has decided to sell Pure Foods because it wants to consolidate its businesses into finance, property and telecommunications.

"Essentially it is to consolidate our business. Obviously, the food business is out of the synergy. That's why the Ayala Group has decided to let it go," explained Danny Gozo, Ayala Group external relations director.

Gozo said the firm's decision to sell Pure Foods had nothing to do with profitability, noting that the food unit remained very profitable.

Pure Foods Corporation had net income of P888 million, up 22 percent from 1999. Net sales of P12.6 billion grew by 19 percent on higher tonnage sales of its processed meats, poultry, and feeds businesses.

Market analysts believe the SMC acquisition will boost the share price of Pure Foods Corp.

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