Emeterio Sd. Perez

BY coming up with an analysis on listed companies, Due Diligencer finds it necessary to explain a few, if not all, PSE postings. Due Diligencer may elaborate with additional data from postings on www.edge.pse.com.ph but does not add anything to disclosures.

With this explanation, following is the ownership profile of San Miguel Corp. (SMC) and that of Top Frontier Investment Holdings Corp. (TFIHC) based on the company’s PSE postings.

As reported in a filing, Top Frontier owns 1.57 billion (1,573,100,340) SMC common shares. Its holdings, equivalent to 66.091 percent of 2.38 billion (2,380,208,250) outstanding common shares, make it SMC’s majority stockholder. In turn, SMC is a subsidiary of Top Frontier.

The percentage is based on Due Diligencer’s computation.

On the other hand, SMC listed the same number of common shares attributed to Top Frontier but came up with only 40.84 percent. The percentage is much lower than 66.091 percent because the computation was based on SMC’s outstanding capital stock of 3.852 billion shares.

In at least one filing, SMC also credits Top Frontier with ownership equivalent to 66.09 percent.

As posted on the PSE’s website, SMC’s 3.852-billion outstanding capital stock is divided into 2.38 billion common shares and 1,472,061,267 preferred shares, or 38.213 percent of the total capital stock.

(Note. The total number of shares is quoted in full when mentioned for the first time but is shortened to three decimal places in succeeding citations.)

Top Frontier’s subsidiary

If SMC is a subsidiary of Top Frontier, the public investors may be interested to know its owners.

It is easy to establish the identities of the majority stockholders of Top Frontier, which, like SMC, is also a listed company.

Businessman Inigo U. Zobel is the single biggest stockholder of Top Frontier. He directly owns 199,601,417 common shares, or 59.961 percent of 332,886,167 A.

As of July 31, the same POR also showed two substantial stockholders, who held 86,658,351 TFIHC common shares, or 26.032 percent. They are Master Year Limited and Privado Holdings Corp., with 49,799,800 TFIHC shares, or 14.96 percent, and 36,858,551 TFIC common shares, or 11.072 percent, respectively.

Both Master Year and Privado Holdings are owned by businessman Ramon S. Ang, who is chairman and president of Top Frontier. He is also president and chief operating officer of San Miguel.

While Top Frontier is SMC’s majority stockholder, SMC, in turn, is also a stockholder of Top Frontier with 2,561,031 TFIHC common shares, or 0.769 percent. It also holds 1,904,540 TFIHC preferred shares as of June 30.

Due Diligencer’s take

If two companies own each other’s shares, whether common or preferred, they are engaged in what could be described as an “incestuous relationship.”

This is evident in SMC, which is a unit of Top Frontier but at the same time a TFHIC stockholder. Its stake in its parent company may not be much, but nevertheless, suggests that the two listed companies “own each other.”

Of course, this “incestuous relationship” is not a monopoly of Top Frontier and SMC. Since this is tolerated by the Securities and Exchange Commission, this could be legal, so that no one among the public stockholders of the two companies would probably take it as a big issue.

As far as the public investors are concerned, they are interested mainly in seeing the value of their holdings increasing from their acquisition price.

However, being the public investors that they are, making companies listed but not necessarily making them public, they may have something to worry about Top Frontier’s 157.31 million treasury shares, which represent 47.256 percent of the company’s outstanding common shares.

What does Top Frontier intend to do with such a huge block of treasury shares? Will it resell them to the public?
By reselling them or reissuing more than 157.31 million treasury shares, Top Frontier could depress the prices of TFIHC common shares, which were last traded on September 6 at P300 each. Will the company do the unexpected? Just asking.



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