San Miguel Bids to Acquire Unspecified $5 Billion Target

San Miguel Corp. (SMC), the Philippines’ largest company, has bid to make a $5 billion acquisition, President Ramon Ang said, amid efforts to expand in aviation and power.

The brewer of the century-old San Miguel beer brand made an initial offer for a deal that may be completed this year, Ang told reporters in Manila today. San Miguel faces other regional companies in the bidding and hopes to make it to the final list of three potential buyers, he said. Ang declined to identify the target company or say what industry it’s in.

“This is going to be a big transaction,” Ang said. “We’re also conducting due diligence on several regional airlines for a possible acquisition.”

San Miguel has expanded from food and drinks to industries including oil, power and infrastructure to meet a target of doubling sales. The company bought almost half of Philippine Airlines Inc. and low-cost affiliate Air Philippines Corp. in April to boost sales this year to almost $20 billion and to $30 billion by 2017, Ang said in an interview that month.

Philippine Airlines signed an agreement in Manila today to buy 10 A330 jets from Airbus SAS, increasing its purchases from the company to 64. The carrier, known as PAL, is in talks with Airbus and Boeing Co. (BA) for 35 more wide-body aircraft to complete a 100-plane fleet, Ang said.

The brewer owns the Southeast Asian nation’s largest oil company, Petron Corp., and is the country’s biggest electricity producer. It bought most of Esso Malaysia Bhd in March, a month before it announced the investment in PAL.

A San Miguel unit plans to add 600 megawatts of coal-fired generating capacity in Visayas and Mindanao, where investment is estimated at $1.5 million per megawatt, Ang said today. That would mean a $900 million expansion, based on Bloomberg calculations.

$7 Billion of Deals

The company has announced 35 deals worth more than $7 billion in the past decade, according to data compiled by Bloomberg. The brewer is expanding into heavy industries to triple the return it previously earned from food and drinks.

In April, Ang talked about “several big” potential acquisitions, including two businesses with combined revenue of $6 billion that may be purchased this year.

San Miguel’s other investments include stakes in power retailer Manila Electric Co. (MER), a toll-road venture, a company that has the contract to build the Philippine capital’s metro railway, an airport on the resort island of Boracay, and 10 percent of Indophil Resources NL, which has indirect holdings in the Tampakan gold and copper mine in southern Philippines.

Safety Issues

Acquiring a regional carrier will help PAL pursue long-haul expansion amid aviation safety issues in the Philippines, Ang said in June. The country is blacklisted by the European Union and has a Category 2 rating from the U.S. Federal Aviation Administration, meaning it doesn’t meet international regulations.

“We’re hoping the prime minister can help us lift the EU ban,” Ang said today during the signing of the deal with Airbus. He was referring to French Prime Minister Jean-Marc Ayrault, who’s on a three-day visit to Manila.

San Miguel shares closed unchanged at 110 pesos yesterday. The stock has lost 5.8 percent this year, compared with a 24 percent gain for the benchmark Philippine Stock Exchange Index.

To contact the reporters on this story: Joel Guinto in Manila at jguinto1@bloomberg.net; Clarissa Batino in Manila at cbatino@bloomberg.net

To contact the editors responsible for this story: Jim McDonald at jmcdonald8@bloomberg.net; Lars Klemming at lklemming@bloomberg.net

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