San Miguel offers $5-B for unnamed Asian firm

Posted at 10/22/12 9:21 AM

MANILA, Philippines - Southeast Asia’s largest conglomerate San Miguel Corp. made a $5-billion  bid for an unnamed company as part of its aggressive diversification into faster-growing industries such as energy, infrastructure and airlines.

San Miguel president Ramon S. Ang refused to give details on the proposed transaction, which he said may be closed this year. “This is a big acquisition and has a big potential,” he said.

In previous interviews, Ang said San Miguel was looking to acquire an Asian firm with international operations.

Aside from this, San Miguel is conducting due diligence on several regional airlines for possible acquisition in line with its goal to restore Philippine Airlines to its position as one of the region’s top carriers.

San Miguel acquired minority stakes in PAL and its affiliate Air Philippines  in April in a deal worth around $500 million, marking its  first foray into the airline business. It took over management control of the airline following the signing of the deal.

Acquiring  a regional airline will help PAL launch more long-haul flights despite the country’s “serious safety concern” status with the International Civil Aviation Organization.

The Philippines has category 2 rating, which means local airlines are banned from expanding operations in the US and from the 27-member European Union due to its failures to comply with international safety standards.

PAL  has suffered from high jet fuel prices in recent years and tough competition from its main rival, budget carrier Cebu Air. Labor disputes has also contributed to the airline’s woes.

San Miguel aims to nurse PAL back to health with plans to mount new flights to new destinations including the Middle East, Europe and other parts of the United States to expand its global reach and swing to profitability in two years time.

The conglomerate is banking on new businesses to fuel its growth as it moves away from its traditional food and drinks businesses.  It aims to hit $20 billion in annual sales this year, three years ahead of its 2015 target mainly on the back of continuous expansion in new businesses.  In the near term, San Miguel is hoping to post P1 trillion in revenues.

During the company’s annual stockholders meeting in June, SMC chairman and chief executive officer Eduardo Cojuangco Jr. said acquisitions and investments they made over the past five years have generated strong revenue and cash for the group despite tough economic and market conditions.

In 2011 alone, SMC’s consolidated sales revenues reached P536 billion, more than double the previous year’s P246 billion.  New businesses contributed over P345 billion, accounting for an estimated 63 percent of the company’s sales last year.

Expected to contribute significantly to SMC’s bottom-line are investments in Exxon MObil’s downstream oil business in Malaysia and its stake in the firms operating Skyway and South Luzon Expressway.

SMC  owns  Southeast Asian nation’s largest oil company, Petron Corp., and is currently the largest oil refinery in the country.   It also holds stakes in power utility giant  Manila Electric Co., a toll road venture which will build the coutnry’scapital’s metro railway,and  an airport on the resort island of Boracay.