Manila moving to replace San Miguel directors


San Miguel chairman Eduardo Cojuangco, left, and Kirin CEO Koichiro Aramaki announce the deal in Manila last Friday

By CNN's Rufi Vigilar

MANILA, Philippines (CNN) -- The Philippine government is moving to replace five directors of the 15-member board of food and beverage giant San Miguel Corporation, before a crucial stockholders' meeting in February.

The move comes after five government representatives on the board, all holdovers from the Joseph Estrada administration, voted without notice last week to sell a 15 percent stake in the firm to Kirin Brewery, Japan's largest brewer.

The Arroyo government missed a deadline to nominate new representatives to the board on January 20 this year, the day Estrada was ousted as president.

The Estrada holdovers say they are entitled to remain board members until next April.

San Miguel struck an agreement with Kirin on December 14 to sell the 15 percent stake for about $540 million, at 62 pesos per B share.

Stockholders vote in February

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If the deal is ratified in a special stockholders' meeting on February 27, it would create the largest brewer in Asia and one of the five largest in the world.

President Gloria Macapagal Arroyo has nominated to the board former Social Security System administrator Renato Valencia, former Far East Bank president Octavio Espiritu, former justice Hector Hofilena, former Presidential Security Guard chief Leo Alvez, and Franklin Fuentebella.

Although President Arroyo has called the Kirin deal a "shot in the arm" for the Philippines economy, she has assigned Trade and Industry Secretary Manuel Roxas to work out a "win-win formula" that would extend preemptive rights to the government and other shareholders, including coconut farmers opposed to the sale.

She originally assigned the task to Finance Secretary Jose Isidro Camacho, but changed to Roxas late Thursday.

The existing shareholders' agreement with Kirin allows San Miguel chairman and Estrada ally Eduardo Cojuangco first right to purchase Kirin shares if the Japanese firm sells out after five years.

The Roxas review committee will also look into a provision in the agreement that Cojuangco and Kirin would vote as a bloc on management decisions.

Cojuangco votes on 20 percent of San Miguel shares, equivalent to three board seats, and has three management nominees under his control.

Supreme Court ruling

With two board seats Kirin would gain through the sale, the perceived Cojuangco-Kirin bloc would control eight of 15 San Miguel board seats.

A Supreme Court ruling Friday firmed up the government's hold on five board seats, apart from two more held by state pension funds.

The ruling declared that controversial coconut levy funds used to buy some 31 percent of San Miguel shares, during the rule of the late dictator and Cojuangco friend Ferdinand Marcos, are "prima facie" public in nature.

But Cojuangco may yet regain control over the five government seats if the coconut levy funds are finally declared private.

The Supreme Court has ordered the Sandiganbayan, the country's anti-graft court, to categorically rule on the nature of the funds within six months.