San Miguel Said to End Talks on $1 Billion Sale of Hot-Dog Unit
San Miguel headquarters
Edwin Tuyay/Bloomberg
Two people with knowledge of the matter said San Miguel has ended talks on the $1 billion sale of its hot -dog unit.
Two people with knowledge of the matter said San Miguel has ended talks on the $1 billion sale of its hot -dog unit. Photographer: Edwin Tuyay/Bloomberg
A shopper picks up San Miguel Pure Foods hot dogs
Edwin Tuyay/Bloomberg
A shopper picks up a package of San Miguel Pure Foods Co.'s hot dogs at a supermarket in Manila.
A shopper picks up a package of San Miguel Pure Foods Co.'s hot dogs at a supermarket in Manila. Photographer: Edwin Tuyay/Bloomberg
Billboard advertising San Miguel Pure Foods hot dogs
Edwin Tuyay/Bloomberg
Pure Foods, purchased by San Miguel nine years ago, has about 63 percent of the nation's hot dog sales.
Pure Foods, purchased by San Miguel nine years ago, has about 63 percent of the nation's hot dog sales. Photographer: Edwin Tuyay/Bloomberg
San Miguel Corp., the Philippines’ biggest food and drinks maker, ended talks to sell its hot-dog unit for more than $1 billion after failing to agree on terms with the Campos family and a partner, two people with knowledge of the matter said.
The foodmaker yesterday said it will sell only as much as 49 percent of San Miguel Pure Foods Co., rejecting an unspecified offer for the whole company. The Campos family and closely held tuna canner Century Pacific Group refused to buy a minority stake and decided to drop their bid, the people said, asking not to be identified because the matter is confidential.
The company that controls the brewer of San Miguel Beer is raising funds to expand into industries including railways, energy, telecommunications and mining that it says have a return on equity triple that of its food and beverage businesses. San Miguel has raised about $3 billion from asset sales since 2008 and had 121 billion pesos ($2.7 billion) in cash as of March 31.
“San Miguel isn’t ready yet to move out totally out of the food business that’s why it wants to keep control,” Alex Pomento, a strategist at the Manila unit of Macquarie Group Ltd., said in a phone interview yesterday. “The best course for San Miguel if it wants to retain control and get the value it wants is to hold a public share sale.”
San Miguel President Ramon Ang didn’t respond to requests for comment. The company didn’t identify the final bidders for Pure Foods in its statement.
Shares Decline
San Miguel’s B shares, which have no ownership restrictions, dropped 2.2 percent to 66.50 pesos, the lowest in more than seven months. The A shares, which foreigners can’t buy, fell 0.15 percent to 67.80 pesos. The Philippine Stock Exchange Index rose 0.9 percent.
San Miguel was in advanced talks with the final bidders for its hot-dog unit, two people with knowledge of the matter said on Aug. 13.
Pure Foods, purchased by Manila-based San Miguel nine years ago, has about 44 percent of the Philippine poultry market and 63 percent of the nation’s hot dog sales. It has forecast a second year of record profit for 2010.
The Campos family owns closely held United Laboratories Inc., the largest Philippine drugmaker, and condiment-producer Nutri Asia Group. A faction of the family bought out San Miguel in Del Monte Pacific Ltd. and also owns own closely held ketchup maker Southeast Asia Food Inc.
Carlyle, Gokongwei, Aboitiz
“Our board has decided that all that should be currently under offer is the sale of a minority stake in our food group,” Ang said in the statement. He had earlier this year valued Pure Foods at $1.8 billion.
The food division posted the steepest growth for San Miguel in the first half, beating the beer, liquor and packaging ventures. Operating income from food doubled to 2.77 billion pesos even as sales grew 1 percent to 37.99 billion pesos, the company reported Aug. 12.
Operating income grew 25 percent at San Miguel’s brewery, expanded 40 percent at the liquor unit and declined 2 percent for the packaging venture.
Power plants acquired last year contributed 700 million pesos to net income. San Miguel didn’t specify their contribution to operating income.
San Miguel’s operating income rose 40 percent to 12.1 billion pesos as sales grew 8 percent. Net income dropped 89 percent to 6.28 billion pesos as the previous year’s earnings were inflated by the sale of brewery assets.
Carlyle Group, a potential bidder, withdrew last month over concerns about price, two people familiar with the matter said at the time. The Philippines’ Gokongwei and Aboitiz families had also made offers, according to Ang.
San Miguel owns 99.92 percent of Pure Foods. The food and beverage maker’s San Miguel Brewery Inc. controls more than 90 percent of the Philippine beer market.
Today’s decline extended this year’s slide for San Miguel’s B shares to 3.6 percent, compared with a 17.7 percent gain for the benchmark index. The A shares have lost 1 percent this year.
To contact the reporters on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net;
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