San Miguel's share swap offer a 'scam' - NGO
By Judith Balea, abs-cbnNEWS.com | 07/12/2009 9:37 PM
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MANILA - Diversified conglomerate San Miguel Corp.'s (SMC) recent offer to swap debt-like preferred shares for the common shares held by its stockholders is a "major scam or trick in the making designed to swindle" coconut farmers who own about 24% of the company, non-government organization Centro Saka Inc. said in a recent commentary.
A few weeks ago, SMC announced the said offer, which was meant to allow stockholders who are doubtful of its expansion into new businesses to reduce exposure to risk by holding debt-like shares rather than just pure equity.
Preferred shares usually pay higher yields and are given priority in dividend payouts, but they are not entitled to voting rights. On the other hand, common shares, which do not promise consistent yields, have voting rights regarding company matters such as the election of board members and approval of business plans.
By law, owners of preferred shares are first to get their share of the remaining assets of a corporation in case of liquidation.
SMC's board recently approved a dividend yield of 8% for its preferred shares which is much higher than the 2% yield for the common shares.
"Seen in the context of the ongoing struggle to recover all the coconut levies, it is obvious that the plan to convert the common shares is but part of the devious plan of [Eduardo] Cojuangco to grab hold again of the coconut levy money," said Romeo Royandoyan, executive director of Centro Saka, a policy and research-based NGO. Cojuangco is chairman of SMC who holds another block of shares in the food-turned-power conglomerate.
Farmers' stake in SMC, held by a consortium of 14 oil-producing companies in the Coconut Industry Investment Fund (CIIF) Oil Mills, consists of over 750 million common shares sequestered by the government and placed under the care of state-run Presidential Commission on Good Government (PGCC), which has representatives in the SMC board. The Supreme Court has declared the shares as "imbued with public interest" for they were said to be purchased using coco levy funds collected from small farmers 3 decades ago.
If the shares are converted into preferred shares, Centro Saka said coconut farmers will not only lose their voting rights in SMC but also "their claim over these shares."
It is worth noting, however, that SMC's offer to stockholders is not mandatory but optional. This means it is up to stockholders to decide whether or not they would take up the offer.
In the case of the coconut farmers, Centro Saka said any transaction to convert into preferred shares will require the go-ahead signal of the CIIF-Oil Mills president.
Shortly after news of SMC's equity restructuring plan came out, Centro Saka said Federation of Philippine Industries president Jesus Arranza, who is "a close ally of Cojuangco," was appointed as president and chief executive of CIIF-Oil Mills, indicating that the conversion of farmers' shares "is not far-fetched."
Centro Saka added: "The lack of reaction from the few supposedly independent directors in the SMC is also worrisome. The government appointed directors, particularly those appointed by Malacañang-PCGG to represent the coconut farmers, did not lift a finger against this grand thievery."
PCGG and SMC officials are unavailable for comments at the moment.
The farmers' stake in SMC is still under court supervision. Any move to change its character, according to the Supreme Court, must always consider its sequestered nature.
Citing this, Centro Saka said SMC "cannot touch and unilaterally convert" the stake.
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