San Miguel Said to Be Close to $1 Billion Sale of Hot-Dog Unit
Ramon Ang, president of San Miguel Corp. Photographer: Nana Buxani/Bloomberg
San Miguel Corp., the Philippines’ biggest food and drinks maker, is close to selling its hot-dog unit for more than $1 billion to the Campos family and a partner, two people with knowledge of the matter said.
San Miguel is in advanced talks with the Campos family and closely held tuna canner Century Pacific Group on terms of a joint offer for San Miguel Pure Foods Co., said the people, who asked not to be identified because the details aren’t final.
“Talks are still ongoing,” San Miguel President Ramon Ang said in a mobile-phone text message late yesterday, declining to comment further.
Acquiring Pure Foods will give the buyers about 44 percent of the Philippine poultry market and 63 percent of the nation’s hot dog sales. Pure Foods, purchased by Manila-based San Miguel nine years ago, has forecast profit to reach a record for the second year in 2010.
Carlyle Group was among the bidders for Pure Foods and withdrew last month over concerns about price, two people familiar with the matter said. The Philippines’ Gokongwei and Aboitiz families had also made offers, Ang said at the time.
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.
Tuna Exporter
Calls to Century Pacific’s corporate office in Ortigas Center, Pasig City and to Campos’ controlled United Laboratories in Mandaluyong City in Manila were unanswered.
Century Pacific says on its website that it’s the Philippines’ biggest exporter of canned and pouched tuna, selling to the U.S., Canada and Europe.
San Miguel Class B shares, which overseas investors can own, rose 2.8 percent to 69.90 pesos at the noon close of trading in Manila today. Its A shares, which only Filipinos can own, declined 0.6 percent to 67.50 pesos.
San Miguel owns 99.92 percent of Pure Foods. The food and beverage maker, whose San Miguel Brewery controls more than 90 percent of the Philippine beer market, earlier this year valued the poultry and hot-dog unit at $1.8 billion.
The sale arms San Miguel’s Ang with more funds as he seeks to accelerate expansion into industries including railways, energy, telecommunications and mining that he said have areturn on equity that’s triple that of its “traditional” food and beverage businesses.
‘Name Recall’
San Miguel acquired Pure Foods in 2001 when it paid Ayala Corp. $138 million for 94 percent of the company. Pure Foods then raised San Miguel’s share in the processed-meat market to at least two-thirds and its share of the feeds business to at least a third. Pure Foods also has operations in Indonesia.
“Pure Foods has name recall and well-established products in the local market,” said Jonathan Ravelas, chief strategist at Banco de Oro Unibank Inc. in Manila. “Anyone who buys it expands market share. San Miguel at this point wants to refocus and is capitalizing on its old franchises to fund the venture into infrastructure that offers huge growth prospects in a country that’s lacking these facilities.”
San Miguel’s expansion helped boosted earnings in the first half when operating income rose 40 percent to 12.1 billion pesos. Operating profit at the food division more than doubled to 2.77 billion pesos.
Pure Foods Earnings
San Miguel Brewery, which is 48 percent owned by Japan’s largest brewer Kirin Holdings Co., said net income grew 14 percent to 5.56 billion pesos.
Pure Foods’ profit will probably rise 10 percent to 15 percent this year and sales may grow about 10 percent to 83 billion pesos, President Francisco Alejo said on May 14. The company, which has a Philippine venture with Hormel Foods Corp., had record earnings of 2.6 billion pesos in 2009 on 75.04 billion pesos sales. It posted 77.19 million pesos net income in 2008 on 71.08 billion pesos of sales.
First-quarter profit at Pure Foods, which also makes ham, coffee, margarine and animal feed, rose to 872 million pesos from 143 million pesos. Sales rose 2 percent to 18.2 billion pesos.
To contact the reporters on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net;Ian Sayson in Manila at isayson@bloomberg.net
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