Yesterday, June 10, Eduardo “Danding” Cojuangco Jr. celebrated his 78th birthday. The management and officers of San Miguel Corp., led by President Ramon S. Ang (RSA) threw a party for him at the Makati Shangri-la, with more than 300 guests.
The chair and CEO of SMC, Dan-ding is the most misunderstood tycoon in the Philippines, largely because of his friendship and association with the late strongman Ferdinand E. Marcos. He was dubbed the quintessential crony.
Actually, Danding was not a crony. He was just being a very good friend—magaling makisama at walang iwanan. But his cousin, the late President Corazon Cojuangco Aquino used her creation, the Presidential Commission on Good Government, to run after him for alleged ill-gotten wealth.
The PCGG committed all kinds of abuses in running after Danding. Even personal assets and inheritance were seized, until today. In the course of time, Danding has proven that the success of his many businesses is due mainly to his entrepreneurial zeal and boldness of vision, qualities that his handpicked successor at San Miguel, has also displayed in enormous measure.
In my book, Danding Cojuangco is the best and most successful Filipino industrialist. His vision was for a prosperous Philippines anchored on the development of agriculture (he is a farmer at heart), and the pursuit of key businesses which are huge growth areas in an economy and population of the Philippines’ size.
PCGG likes to portray Danding as having stolen the money of coco farmers thru the so-called coco levy. Not true. The original Coconut Industry Investment Fund (CIIF) was only 33.133 million shares of San Miguel. At P50 per share, the 33.13 million shares were worth P1.656 billion.
That was in 1983. They represented 31 percent of SMC common shares which later became just 24 percent. In 2012, 28 years later, those shares had ballooned to 753.848 million.
In October 2012, the 753.848 million San Miguel shares were redeemed by the company at P75 per share. Total redemption price: P56.53 billion.
In addition, between 1984 and 2009, SMC declared cash dividends on the CIIF shares of P12.727 billion. From 2009 to 2012, the common shares became preferred shares which separately earned cash dividends during that period of P13.569 billion.
Add the three—P56.53 billion redemption price of the SMC common shares which became preferred shares, plus P56.53 billion cash dividends for the common shares, plus P13.56 billion cash dividends for the preferred shares—you get P82.83 billion.
Therefore, the P1.656 billion invested in SMC in the name of the CIIF in 1983 became P82.83 billion. Each peso became P50– 50 times after 28 years.
Subcontract P82.83 billion from P1.656 billion, you get P81.178 billion. Divide P81.178 by P1.656 to get the percentage yield—4,902 percent. Divide 4,902 by 29 years, you get 175 percent.
The CIIF shares in SMC made an average of 175 percent per year for 28 years—a stupendous return by any measure.
Please note that during those 28 years, the Philippines suffered three major recessions, nine coup attempts and two People Power revolts.
Per capita income actually declined as per capita income growth became among the lowest in the world. Poverty worsened. Joblessness increased. But CIIF’s income in San Miguel? CIIF hauled in P81.17 billion for its P1.6 billion—more than 50 times more in 28 years.
The irony is that it is doubtful whether the so-called CIIF money of P1.6 billion really belonged to the coconut farmers.It was Danding’s money disguised as CIIF money.
That the P1.6 billion grew in 28 years, from 1984 to 2012, to over P82 billion is proof that Cojuangco didn’t deceive or steal money from the coconut farmers. It is proves his excellent management of SMC, from 1998 to today, its period of most robust and most frenetic growth.
Cojuangco and his group were denied ownership of the 24 percent and its dividends. Danding now considers the P82 billion as his gift to the millions of coconut farmers. The money was sequestered by the government which failed to develop the coconut industry, which is why today our coconut farmers are among the poorest Filipinos.
Since the P82 billion today is not ill-gotten wealth, it cannot go to agrarian reform. It can only be used for the benefit of coconut farmers. In the meantime, the government gets a windfall, the P82 billion, without investing a single centavo in San Miguel.
In 1983, Cojuangco bought 20 percent of San Miguel, using his money from the sale of his Bank of Commerce and bank borrowings. The 20 percent was equivalent to 16.276 million shares. His purchase price was P488.28 million ($49 million) at P30 per share, three times SMC’s share price then in the stock market.
Later that year, he bought another 31 percent (the 33.13 million shares) using mostly San Miguel’s corporate funds deposited with the United Coconut Planters Bank (UCPB). Purchase price for the 31 percent—P1.656 billion at P50 per share. The 31 percent was invested in the name of coconut farmers.
The 31 percent was a leveraged buyout, financed mostly with San Miguel funds. The beer company deposited $45 million (P500 million) in UCPB in the form of preferred shares. For the remaining P1.156 billion, SMC placed commercial deposits in UCPB.
Cojuangco placed the 31 percent in the name of 14 holding companies.
The 14 firms, in turn, were owned by six coconut oil companies funded by the Coconut Industry Investment Fund (CIIF). The CIIF came from a levy paid by coconut planters and exporters.
The coco levy collections swelled to P9.6 billion by the time the levy was stopped in 1982. In 2007, Cojuangco paid P4.786 million to UCPB to repay the P1.65 billion used to buy the 31 percent.
During Danding (and later RSA’s watch), San Miguel grew in sales from a P6.6-billion mainly beer and food company in 1983 to a diversified conglomerate with P536 billion ($12.4 billion) in annual sales by 2011 and P698.86 billion ($16.55 billion) in 2012. SMC profits had swelled from P405 million in 1983 to P38.62 billion (with P27.57 billion going to the parent company) in 2012.