SMC moves forward with Eagle takeover after PCC clearance

By Miguel R. Camus

October 29, 2022 12:00:00

Billionaire Ramon Ang-led conglomerate San Miguel Corp. (SMC) is moving forward with the takeover of Eagle Cement after the antitrust watchdog signaled it would not review the P97-billion deal that creates one of the country's largest cement companies supplying the key Luzon and Metro Manila markets.

Approval of the powerful Philippine Competition Commission (PCC) was a critical obstacle to the buyout of 88.5 percent of Eagle Cement, a listed firm controlled by Ang.

But SMC said on Friday it was informed by the government body the deal would not be covered by its rules requiring notification for review.

"With the issuance of the aforementioned notice, the transaction shall not be subject to review by the PCC based on the implementing rules and regulations of the Philippine Competition Act," SMC said.

Because of the PCC notice, SMC will proceed with the mandated tender offer to buy the remaining 11.5 percent of Eagle from minority stockholders, which was another requirement to complete the transaction.

The P12.7-billion tender offer would be valued at the same buyout price of P22.02 per share, which was a 43-percent premium to Eagle's share price when the deal was first announced last Oct. 4.

Meanwhile, Eagle shares flew closer to the tender offer price, closing up 9.21 percent to P20.75 each while SMC tumbled 2.29 percent to P96.20 per share.

Eagle's market position was previously reviewed by the PCC during SMC's unsuccessful bid to acquire cement giant Holcim Philippines three years ago.

The $2-billion deal was scuttled in 2020 after the government body raised monopoly concerns since the Holcim deal would have substantially reduced competition in Luzon, which accounts for over 60 percent of the total Philippine cement demand.

In its review, the PCC considered Eagle's close ties to the SMC Group given their interlocking officers and directors.

Ang is chair of Eagle while his his son, John Paul Ang, is company's president, CEO and a director of SMC.

SMC earlier said both Ramon Ang and John Paul Ang "did not participate in the approval by the board of directors of the corporation of the proposed acquisition."

Eagle, which went public in 2017, operates a fully integrated cement plant in San IIdefonso, Bulacan, with an annual production capacity of 8.6 million metric tons, equivalent to 215 million bags per year.

Eagle controls an estimated market share of 29 percent in the combined areas of Metro Manila, Central Luzon and Southern Tagalog, its annual report showed.

Sales in the first half of 2022 jumped 24 percent to P13.7 billion on higher volume and selling prices. Profits fell 20 percent to P2.96 billion as margins were pressured by rising production costs.

The board of Eagle earlier disclosed it would apply for delisting from the exchange should the tender offer result in its public ownership level falling below the minimum 10 percent.

SMC owns North Cement Corp., (NCC) which supplies cement in Central and Northern Luzon with a production capacity of 2.2 million tons of finished cement per year.

In 2021, NCC was merged with San Miguel Northern Cement Inc., which is developing capacity for another 4.73 million tons of cement per year.

The conglomerate also owns Southern Concerte Industries Inc., whose cement grinding plant in Santa Cruz in Davao del Sur was expected to start commercial operations in the first semester of 2022. INQ