FILIPINO TYCOONS BLOCK METRO
PACIFIC SMC BID
Contributed by Asia Daily News analyst Katherine
Nelson
Manila, Nov. 10, 1997 - San Miguel Corporation (SMC) Chairman Andres Soriano III has received a flood of support pledges from Filipino business leaders wary of the alleged takeover bid being prepared by Metro Pacific, the local subsidiary of the Hong Kong-based First Pacific Co. Ltd.
Sources close to the embattled corporate leaders said Soriano and his allies are fighting back, with the help of government official leery over the prospective return of Marcos's financial henchmen. Metro Pacific has been linked to former cronies of the late President Ferdinand Marcos and powerful business associates of Indonesian strongman Suharto.
The Philippine Daily Inquirer's Cocktales column reported a deal between Eduardo Cojuangco and First Pacific Group managing director Manuel Pangilinan over Cojuangco's 20% stake in San Miguel. Columnist Vic Agustin wrote that Pangilinan had paid a non-refundable P480-million down payment for Cojuangco's shares, with the balance payable in 4 years.
A close business partner of Soriano said this development is bad timing for Metro Pacific. "Recent economic developments in Southeast Asia have shown just how vulnerable our systems are to predators," he said. "Filipinos are raring to defend their turf against those who see the market as just a quick way to make a killing, with no regard for a community's long term well- being."
Since 1993, the highly-diversified Metro Pacific Corp has bought into important economic sectors, including drug distribution and consumer products, packaging, telecommunications, banking, chocolates and property. But the firm has bailed out from some of its earlier ventures, including Philippine Cocoa Corp and AR Packaging.
Many market analysts, however, feel that Metro may have over-extended on its Fort Bonifacio venture -- a perception bolstered by tempestuous exists of the firm's consortium partners, including Andrew Gotianum of the highly-respected property firm Filinvest. This year alone, there have been three turnovers in the Metro's board of directors.
Metro Pacific's foreign debt level is expected to rise to $300 million by this year, 44 percent of total debt. Analysts also note that the depreciating peso, coupled with high interest rates could raise interest cost from P1.1 billion this year to P2.9 billion in 1999, with a 156 percent net debt-to-equity ratio next year.
The firm's vast exposure to high rise property developments -- 78 percent of its total assets are sunk in the Bonifacio Land Corp -- has also placed it on a higher risk counter. The company announced last Oct. 27 the postponement off Smart Communications' initial public offering, originally scheduled for mid-year, "due to local and international uncertainty of financial markets." Metro Pacific controls 40% of the cellular market leader.
The SMC incursion, given Metro Pacific's current problems, raises fears of a raiding party on the venerable Filipino conglomerate. There are reports of plans to sell off some SMC units to cover up substantial losses in the Fort Bonifacio project.
Soriano's business partner said local businessmen credit the country's relative ability to withstand regional economic jitters to the Ramos administration's bias for medium and long-term capital investments over the quick-in, quick-out stock market funds. The domestic real estate sector has also been spared from a big crash, he added, because of prudent fiscal and banking regulations.
While Filipinos do not yearn for the old protectionist era that nurtured a powerful oligarchy, Soriano's ally claimed the local business mind-set has been drifting towards tie-ups with partners willing to invest time and effort as the country completes its economic rehabilitation.
"Our work ethics have changed," said the young tycoon. "No more easy money."
Our source, a trailblazer in Filipino investments overseas, thinks the local investors are willing to ride out the volatile market and concentrate on strengthening economic fundamentals. "We are not offering the country's blue chip firms to carpetbaggers, who will only gut these corporations and get out with their mega-profits, leaving the economy in shambles."