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I actually do not know if this is a follow-on offering. It is one of those unconventional equity public offerings. Anyway, San Miguel Corporation (yes, the parent company, not the brewery), plans to raise USD1.5-2 Billion. The salient terms of the offer are as follows:

Issuer	San Miguel Corporation
Offer Price	To be determined via auction/bidding by the underwriters.
Issue Size	USD 1.5 – 2.0 Billion
Offer Structure	Offer Size: 50% from Top Frontier Shares 50% from Treasury Shares Number of shares will be determined upon determination of final offer price
Current Ownership Structure	67.89% of the outstanding shares are owned by Top Frontier Invts.,
Use of Proceeds	Payment of Top Frontier Debt
Domestic Lead Underwriter	ATR KimEng Capital Partners, Inc., SB Capital and BDO Capital
Joint Global Coordinators and Book Runners	Standard Chartered Bank, Credit Suisse, Deutsche Bank, Goldman Sachs, and UBS
Pricing	April 20, 2011
Domestic Offer Period	April 25-29, 2011
Listing Date	May 4, 2011

 

 

Yup, there is no range of share prices. It will be determined based on the bids during the commitment date. Thus, the number of shares will be determined once the price has been set. Indeed, San Miguel tried to change the dynamics of their fund raising. This mechanism is probably influenced by SMC’s Treasurer Sergio Edeza, given his very extensive experience as National Treasurer.

It is really hard to come up with a valuation of San Miguel because it is a conglomerate with a wide array of subsidiaries, more than half of which are in industries that are way different from their core. It is already a given. I’ll try to find some quick and dirty simulations as more information becomes available. But here are my two cents worth at this point:

1. San Miguel will try its best to haggle for a high share price. They obviously think that their shares are still undervalued given current share prices of PHP170-172. Perhaps part of the psychological game is their earlier press release of an offer price of PHP200-250 per share, even if the offer size seemed ridiculous.
2. However, despite San Miguel being a giant conglomerate (sales allegedly represent 3% of the country’s Gross Domestic Product), I still think that the foreign underwriters will price it at a discount from market. After all, no matter what the price will be, Top Frontier (aka Ramon Ang) will still gain from the share sale because they accumulated shares from various common shareholders (including the government) at PHP75 per share.
3. But whatever the offer price may be, since around 80-95% (yes, the range is that big and uncertain) will be offered abroad, it is likely that it will be taken up by funds and sophisticated investors who need huge block of shares of SMC for their respective portfolios. These funds/investors need exposure to emerging markets like the Philippines. If you are after an exposure on Philippine equities, how can you not have San Miguel? It is definitely not easy getting such huge block from the secondary market, which brings me to point number 4…
4. If you are a retail or indifferent investor, just buy in the secondary market. If you think the offer price will be just aligned with the current market price or higher, then you better buy now.  If for whatever reason (fingers crossed) the offer price becomes lower than market, then you still better buy in the secondary market since eventually, SMC’s share price will revert close if not the same to the offer price.

Is San Miguel a good company? Personally, I think so. But is the stock good? Hmmm… I think it is pricy. but it might be worth accumulating now for trading gains purposes. Try not to listen to me though, as I am not a really good stock trader.

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