THE acquisition by San Miguel Corp. (SMC) of an 88.5% stake in Eagle Cement Corp. may be blocked by the Philippine Competition Commission (PCC), CreditSights, Inc. said. READ:
Last week, Eagle Cement’s majority shareholders agreed to sell their holdings to San Miguel Equity Investments, Inc. , a unit of SMC.
It added that SMC already has a presence in the cement business with 9 million mtpa capacity through SMEII and its three wholly owned subsidiaries: Northern Cement Corp., San Miguel Northern Cement, Inc., and Oro Cemento Industries Corp. The acquisition will create synergies within SMC’s infrastructure business in addition to boosting its cement production capacity, which in turn can reduce the cost of procuring cement.In its consolidation, SMC’s revenues are expected to rise by 2% to P1.27 trillion, and its earnings before interest, taxes, depreciation, and amortization by 4% to P194 billion.
“Overall, we do not think the consolidation of the Eagle Cement business would move the needle for SMC on a consolidated basis… As the transaction is a related-party transaction, with Ramon Ang helming both SMC and Eagle Cement, given the high premium paid, it raises questions on whether the deal was conducted at an arm’s length basis,” CreditSights said.
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