Manila puts off San Miguel stake sale


San Miguel Corp is the largest food and beverage firm in the Philippines

By Amabelle Layug
CNN Hong Kong

MANILA, Philippines -- The Philippine government has deferred its plan to sell its stake in San Miguel Corp., in light of Kirin Brewery's move to buy 15 percent of the company.

The government had a standing plan to sell its 27 percent share in San Miguel, the country's biggest food and beverage company, to launch a trust fund to back the coconut industry.

But Philippine Presidential spokesperson Roberto Tiglao said the plan has been put off indefinitely, as the government needs to study the impact of the Kirin buyin.

"I'm afraid we haven't set up a schedule for this. We have to absorb first the impact of the Kirin buyin," Tiglao said in an interview with a local news channel. "Even foreign investors would have to evaluate the role of Kirin in San Miguel."

Kirin deal lands government backing

Kirin, Japan's second largest brewer, has inked a deal to buy 15 percent of San Miguel for $543 million.

The move is part of Kirin's strategy to expand into Southeast Asia, as beer sales continue to decline in Japan. It has also been losing a market-share battle with beer No. 1 Asahi at home.

The government had vowed to block the deal, worried it might dilute the state's interest in San Miguel.

But President Gloria Macapagal Arroyo's administration struck a bargain last week with San Miguel Chairman Eduardo Cojuangco.

It will support the Kirin stake at a February 27 shareholders vote. In exchange, Cojuangco will allow the government full representation of its nominees on all committees and subsidiaries of San Miguel.

The government locked horns with Cojuangco last year after the chairman refused to accept new government appointees to the San Miguel board.

Contested shares stem from coconut scandal

Arroyo had demanded her appointees be allowed to sit in the board, replacing directors appointed by her ousted predecessor Joseph Estrada.

Arroyo argued the Estrada appointees do not represent the state's interest since Estrada is closely linked to Cojuangco.

Cojuangco is a huge contributor to the fallen leader's presidential campaign.

The Philippines sequestered 47 percent of San Miguel in 1996, on suspicion that the shares were bought using a tax fund for coconut farmers.

Cojuangco was able to regain his shares shortly after Estrada took office in 1998.

The court then gave him voting rights but no other privileges over his 20 percent stake.

The government owns 27 percent of San Miguel directly, with the real ownership of that 20 percent still under litigation between Cojuangco and the government.

The government plans to sell its San Miguel shares and use the money as a buffer fund to benefit coconut farmers.

Despite the issue surrounding Cojuangco's stake, shareholders have expressed satisfaction with his leadership after he was able to turn the floundering company into a profitable food and beverage empire.