February 17, 2016
Sugaronline | http://goo.gl/gbOiYL
First Pacific Company Ltd. has divested its entire stake worth PHP1.83 billion (US$38.4 million) in Lucio C. Tan-led Victorias Milling Company, Inc., according to the Philippines’ Business World newspaper.
VMC told the stock exchange it was acquiring 365 million shares, equivalent to 12.53% of the company's outstanding shares, from First Agri Holdings Corp., Hargate Investments Limited and Nestar Investments Ltd at PHP5 apiece. The shares represent a premium of 8.7% to its closing price of PHP4.60 each on Tuesday, up five centavos or 1.10% from PHP4.55 apiece on Feb. 12. The selling shareholders are affiliated with Hong Kong-based First Pacific, according to a knowledgeable source.
"This is typical of First Pacific. They probably had in mind a bigger stake in VMC, but the major shareholders are steadfast in their holdings so MVP just decided this is the way to go," HDI Securities, Inc. President George Cabo Cheng said in an interview, referring to First Pacific Managing Director and Chief Executive Officer Manuel V. Pangilinan.
First Pacific, which has long been scouting for opportunities in Philippine agriculture, bought into VMC in April 2014 after sealing a deal to acquire a third of Roxas Holdings, Inc. in November 2013. The conglomerate gained control of RHI last year through capital infusion. RHI announced last week it was raising funds through a rights offer, but details of the share sale have yet to be finalized.
"I think at PHP5 per share, MVP gets a good return because the acquisition back then was at PHP4.60 per share," Mr. Cheng said.
The deal with First Pacific will "enhance shareholder values," resulting in an increase in earnings per share to about 42 cents from 34 cents. The shares will go to treasury. "The stock repurchase sends a strong signal that management believes that the future of the company continues to be bright, so much so that it is willing to invest in itself," VMC said in a statement attached to a disclosure.
VMC said the funds earmarked for the buyback program are sufficient after taking into consideration capital expenditures for this crop year and cash receipts from operations. In the last three years, VMC has embarked on a program to pre-pay all loans under the rehabilitation plan approved by the Securities and Exchange Commission. The company has fully paid in advance PHP4.4 billion worth of restructured loans and fully redeemed convertible notes in the hands of its original note holders. VMC operates mill and refinery facilities for sugar and allied products, and offers engineering services. It secured approval in July 2013 to branch out to ethanol and potable alcohol production, infrastructure, transportation, telecommunication, mining, water, power generation, recreation and financial or credit consultancy.