“Honey, I have shrunk the IPO”
For the third time since the announcement of the IPO of its domestic beer unit, San Miguel Corp. has shrunk the expected proceeds. What has once been touted as a major listing is to fetch USD 147 million only.
Sometimes it helps not to have a long memory. But how could investors forget that at the start of the year, San Miguel Brewery was gearing up to be the Philippines’ biggest-ever IPO with maximum proceeds of USD 600 million plus.
According to media reports, it was turbulent market conditions and investor complaints that the offer was too expensive which forced San Miguel to twice shrink the price range and halve the offer to just 5.0 percent of San Miguel Brewery’s stock.
The listing will be held on 12 May 2008. The proceeds will be used to pay off debt. San Miguel is offering 70 percent of the listing to foreign investors and the rest to domestic buyers.
The IPO price values San Miguel Brewery, the Philippines dominant beer producer, at 13.7 times forward earnings, still at a premium to the local market, which is trading around 10 times, but broadly in line with regional peers, it was reported.
Singapore’s Asia Pacific Breweries (in which Heineken has a stake) is valued at 22.2 times forward earnings, Thai Beverage is valued at 13.9 times forward earnings, and Japan’s Kirin is valued at 11.7 times.
San Miguel’s shares have been under severe pressure and have lost around 35 percent since the company announced in May 2007 that it wanted to diversify into heavy industry in its home market. Investors sold the shares on uncertainty over whether San Miguel’s plans would be profitable.
The company, in which Kirin holds around 20 percent, has been selling off businesses to prepare for its diversification schemes. Last year, it sold its biggest overseas unit, Australian dairy and juice manufacturer National Foods, to Kirin for USD 2.6 billion. A planned IPO of its regional packaging business has been shelved until next year.
The IPO values the beer business, considered the company crown jewel, at USD 2.9 billion, and is the only big listing scheduled for this year. The parent group has a market value of around USD 3.45 billion.
