The board of directors of San Miguel Corp.'s (SMC) brewing unit, San Miguel Brewery Inc. (SMB), has approved a plan to raise up to P38.8 billion through what would be the country's biggest corporate bond issue ever.
In a disclosure to the Philippine Stock Exchange, SMB said it would raise the amount from the issuance of peso and/or dollar bonds.
The company would use proceeds to buy up the beer brands, intellectual property rights and real estate of its parent, it said.
SMC is selling its beer brands to the unit for P32 billion and the land on which the breweries are built for P6.8 billion.
The company, which is Southeast Asia's largest food and drinks group, would use the sale proceeds to pay down debts and bankroll its diversification into heavy industries.
SMC last year acquired a 27 percent stake in power distributor Manila Electric Co. and a controlling stake in local oil refiner Petron Corp.
It has also announced plans to bid for the government's power generating assets as well as explore an alliance with Indonesia's PT Bumi Resources, which owns the world's largest thermal coal exporter, Kaltim Prima Coal.
SMC plans to sell portions of its packaging business this year.
Earlier this year, the company and Japan's Kirin Holdings Co. Ltd. announced they had signed an agreement to negotiate the sale of up to 43.25 percent of SMB to Kirin by February. The deal would leave SMC with a 51 percent stake.
Kirin said its planned investment in SMB would significantly contribute to the growth of its alcohol business in Asia and Oceania. SMB's beer market share in the Philippines is nearly 95 percent and parent firm SMC has long been in the business in Asia, including China, Vietnam, Indonesia and Thailand.
Kirin also said it has taken interest in SMB because of the beer company's profitability.
For the full year 2008, SMB posted a 25.3 percent rise in net income to P10.04 billion from P8.02 billion in the year before. The company attributed the growth "to the operating leverage and a tighter focus on cost control, with good progress on efficiency and volume generating programs."
SMB has sold 174.5 million cases last year, up 4 percent over the previous year and boosting its net sales to P48.8 billion from P44.1 billion in 2007.