True to its avowed aim at diversification outside its core foods and beverages business, San Miguel Corporation (PSE: SMC) has reportedly trained its sights on acquiring a stake worth about $500 million in PT Adaro Energy (JSE: ADRO), Indonesia’s second=largest coal producer, according to news wires.San Miguel president Ramon S Ang confirmed that his company is in talks with Goldman Sachs, its financial advisor on its diversification forays, on the planned acquisition but declined to say how much stake it is aiming for.
Bisnis Indonesia has reported that investors Goldman Sachs itself, hedge fund Farallon, Citigroup Global Special Situations Group and Atticus Investments Pte. Ltd. are looking at buyers for their combined 17% stake in the coal firm. Analysts say that these investors, who participated in the coal miner’s $1.3 billion initial public offering (IPO) last year, are looking to sell out at IDR 1,200 per share, given the uncertainty of coal prices amid global economic downturn.
Two members of the same consortium who has a combined 26% at the end of the IPO, the Government of Singapore Investment Corporation and Kerry Coal, are reportedly not keen on selling out at this time.
The other largest holders of the company are PT Saratoga Investama Sedaya which is owned by Indonesian entrepreneur Edwin Soeryadjaya and Teddy Rachmat, one of Indonesia’s richest businessmen, who own 32% each.
That asking price is just slightly above the IPO price of IDR 1,100 a share and the current prices which has hovered at the same level. The selling investors would still reap windfall profits since they have been long-time investors in the coal firm.
The planned sale was already expected given that the lockup period ended in March for these financial sponsors.
Would this foray into an unrelated business from its core food competence be good for San Miguel and its shareholders?
Hard to say at this time.
During the last two years, SMC has weaned itself from the food business by taking a 27% in electricity distributor Manila Electric Company (Meralco, PSE: MER) and planning a majority stake in oil refiner petron Corporation (PSE: PCOR). It has also a joint venture in telecommunications with a foreign partner and is looking at entering the water distribution business locally.
Its intentions in Adaro is its second attempt at getting a foothold at Indonesian coal after its planned acquisition of a significant chunk of PT Bumi Resources (JSE: BUMI), Indonesia’s largest coal producer, fizzled out.
For sure, SMC won’t be calling the shots at Adaro since its planned 17% couldn’t exert significant management influence and control. It would be entering a business firm whose sole product coal is a commodity whose prices are subject to world economic movements.
When oil prices were rising, so did the coal prices. But when commodity prices collapsed, so did the latter.
At this time when the global economic downturn appears to be stretching longer than expected despite pronouncements of an imminent economic recovery, commodity prices including that of coal, may be struck in the doldrums for a long time.
That could mean that, should this deal push through, SMC investors would have to wait patiently before the firm’s Adaro stake could bear fruit.
Bisnis Indonesia has reported that investors Goldman Sachs itself, hedge fund Farallon, Citigroup Global Special Situations Group and Atticus Investments Pte. Ltd. are looking at buyers for their combined 17% stake in the coal firm. Analysts say that these investors, who participated in the coal miner’s $1.3 billion initial public offering (IPO) last year, are looking to sell out at IDR 1,200 per share, given the uncertainty of coal prices amid global economic downturn.
Two members of the same consortium who has a combined 26% at the end of the IPO, the Government of Singapore Investment Corporation and Kerry Coal, are reportedly not keen on selling out at this time.
The other largest holders of the company are PT Saratoga Investama Sedaya which is owned by Indonesian entrepreneur Edwin Soeryadjaya and Teddy Rachmat, one of Indonesia’s richest businessmen, who own 32% each.
That asking price is just slightly above the IPO price of IDR 1,100 a share and the current prices which has hovered at the same level. The selling investors would still reap windfall profits since they have been long-time investors in the coal firm.
The planned sale was already expected given that the lockup period ended in March for these financial sponsors.
Would this foray into an unrelated business from its core food competence be good for San Miguel and its shareholders?
Hard to say at this time.
During the last two years, SMC has weaned itself from the food business by taking a 27% in electricity distributor Manila Electric Company (Meralco, PSE: MER) and planning a majority stake in oil refiner petron Corporation (PSE: PCOR). It has also a joint venture in telecommunications with a foreign partner and is looking at entering the water distribution business locally.
Its intentions in Adaro is its second attempt at getting a foothold at Indonesian coal after its planned acquisition of a significant chunk of PT Bumi Resources (JSE: BUMI), Indonesia’s largest coal producer, fizzled out.
For sure, SMC won’t be calling the shots at Adaro since its planned 17% couldn’t exert significant management influence and control. It would be entering a business firm whose sole product coal is a commodity whose prices are subject to world economic movements.
When oil prices were rising, so did the coal prices. But when commodity prices collapsed, so did the latter.
At this time when the global economic downturn appears to be stretching longer than expected despite pronouncements of an imminent economic recovery, commodity prices including that of coal, may be struck in the doldrums for a long time.
That could mean that, should this deal push through, SMC investors would have to wait patiently before the firm’s Adaro stake could bear fruit.
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