Top Frontier Taking Over San Miguel

Business Week via Bloomberg reports that the board of the San Miguel Corporation has agreed to a takeover by Top Frontier Holdings Incorporated. Top Frontier will offer 75 pesos per share, which puts San Miguel at a market value of 171.7 billion pesos, or $3.75 billion. San Miguel is the largest food and beverage company in the Philippines. It owns San Miguel Beer, which dominates the local market and which is apparently one of the largest beer brands in the world.

Top Frontier is controlled by several members of the San Miguel board of directors. It is owned by Roberto Ongpin, a former trade minister, and Inigo Zobel, a member of one of the wealthiest families in the Philippines.

Part the motivation for the takeover may be a desire to reduce government influence over the company. The government owns a disputed block of San Miguel stock. It was acquired under the Aquino government, who seized it from Eduardo Conjuangco, Jr. on the grounds that he acquired it with public funds. An anti-graft court has apparently ruled that the government does not have a legitimate claim to the stock, but the Supreme Court has yet to rule on the government's appeal. Conjuangco, chairman and CEO of the San Miguel board, has nevertheless been permitted to vote his former shares.

On January 6, San Miguel Corporation announced that it would acquire a 49% stake of Top Frontier. According to the Philippine Daily Inquirer, this significant minority stake was assumed in order to expand San Miguel's access to bank loans. Under the single borrower's limit (SBL) rule, banks in the Philippines are limited in the amount of lending they can make to a company or its subsidiaries. However, corporate affiliates are exempt from the SBL cap.

San Miguel began operations as a brewer in 1890, during the waning days of Spanish colonization.