Philippine food and beverage giant San Miguel Corp has repurchased the local Coca-Cola bottling company after selling it only two years before to Australia's Coca-Cola Amatil.
The repurchase consists of a combination of stock swap, cash and debt valued at A$2.25 billion ($1.24 billion) for 65% in Coca-Cola Philippines.
In 1997, San Miguel sold its 70% stake in Coca-Cola Philippines to Coca-Cola Amatil in a $2.7 billion stock swap. By repurchasing 65% for $1.24 billion of Coca-Cola Philippines, San Miguel has clearly profited from the two-year repo transaction, while Coca-Cola Amatil is expected to take a loss.
Surprisingly, by accounting magic Coca-Cola Amatil will recognize not a loss, but a gain of A$370 million because it had written off one third of its investment in Coca-Cola Philippines sometime in 1999.
This repurchase was actually a three-way transaction as The Coca-Cola Company (TCCC) teamed up with San Miguel to acquire the Philippine bottler from the Australian company. The remaining 35% of the local bottler is now with TCCC.
Coca-Cola Philippines is one of the most efficient Coke bottlers in the world. It has a 70% share in the country's soft drinks market.
In 1997, Coca-Cola Philippines was sold by then SMC chairman Andres Soriano III to Coca-Cola Amatil for a 25% in the latter. At the time, Danding Cojuangco, the predecessor of Soriano, tried to block the sale.
In 1998, when Cojuangco’s friend Joseph Estrada became President of the country, Cojuangco regained control of San Miguel.
Meanwhile, SMC Chairman Danding Cojuangco, who controls 20%, may lose his seat if the newly installed Macapagal administration exercises the rights of the 27% of SMC that the government owns through the controversial coconut levy fund.
ABN Amro is the financial advisor of San Miguel for this sale.
