San Miguel May Sell $3.5 Billion Manila Electric Stake in Parts

San Miguel Corp., the biggest Philippine company by sales, is considering selling its stake in Manila Electric Co. (MER) in parts because finding a buyer for the entire holding worth $3.5 billion is proving difficult.

“Many interested parties have inquired,” San Miguel President Ramon Ang told reporters today in Manila after the company’s annual meeting, putting a value to the 32.8 percent holding in the nation’s largest power retailer. “Because of the size, the shares can’t be sold easily.”

Selling shares in Manila Electric will help fund San Miguel’s planned $35 billion of investments as it expands into energy and away from its traditional food and drink businesses. The challenge would be to find a purchaser in a stock market that has retreated more than 11 percent from its May 15 peak, analyst Joseph Lago said.

“It’s the best strategy for San Miguel given the current market situation,” said Lago, head of research at Manila-based PCCI Securities Brokers Corp., referring to the piecemeal sale under discussion. “San Miguel may not be getting the price it wants because the market is falling. Even if Manila Electric is a good company, the buyer will seek a discount, given the current environment.”

Falling Market

The Philippine Stock Exchange Index slumped 4.6 percent to 6,556.65 today in Manila, the sharpest loss since Sept. 23, 2011. The gauge closed at a record 7,392.20 on May 15.

The company is working with four banks to sell the stake, three people with knowledge of the matter said last week.

San Miguel fell 2.1 percent to 95 pesos today. The shares have fallen 9.9 percent this year against the benchmark stock index’s 13 percent gain. Manila Electric fell 6.5 percent to 345 pesos, the most since May 16, 2012.

San Miguel said last week that unidentified parties expressed interest in its stake in Manila Electric, or Meralco as the company is known. Most of the shares in Manila Electric, which supplies power to a quarter of the nation’s population, were bought at 90 pesos apiece in 2008, 26 percent of the price today.

San Miguel, which started as a brewer more than a century ago, is seeking to boost revenue to $50 billion in five years. Sales climbed 30 percent to 698.9 billion pesos ($16.2 billion) in 2012, missing a $20 billion company target. Fuel and oil accounted for 60 percent of sales, according to data compiled by Bloomberg.

Oil, Gas

Oil and gas fields that can produce 1 million barrels a day are assets San Miguel plans to add to its portfolio, Ang said on March 6. The company owns most of Petron Corp., the Philippines’ largest oil refiner and its biggest electricity producer through unit SMC Global Power Holdings Corp.

San Miguel may raise at least $150 million selling between 10 percent and 15 percent of SMC Global Power this year through an initial public offering, Ang said today. Eventually, San Miguel may sell as much as 49 percent of the venture depending on market conditions, he said.

The company expects to complete the sale of a controlling stake in Manila-based Bank of Commerce to Malaysia’s CIMB Group Holdings Bhd. (CIMB) in about a month, Ang said. An agreement was reached last night and the transaction will be completed in 30 days or so, he said.

To contact the reporters on this story: Cecilia Yap in Manila at cyap19@bloomberg.net; Ian Sayson in Manila at isayson@bloomberg.net

To contact the editors responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net; Jason Rogers at jrogers73@bloomberg.net

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