PASIG CITY Philippines — Philippine food and beverage giant San Miguel Corp. agreed to sell its remaining stake in Coca-Cola Bottlers Phils Inc. to the Atlanta-based parent Coca-Cola Co. for $590 million.

In a disclosure to the Philippine Stock Exchange Dec. 29 San Miguel said it decided to sell its 65% stake in Coca-Cola Bottlers Phils Inc. "to provide the company longer-term commercial flexibility." Coca-Cola Atlanta already owns 35% of the Philippine unit.

Stock market analysts expressed surprise over the sale price after they earlier projected the deal to cost between $700 million to $800 million. But San Miguel said the price is still "subject to adjustments" pending the completion of the closing of accounts in Coca-Cola and the provisions of the transition service and cooperation agreement.

"The parties agreed to a transition service agreement whereby the company will continue to provide Coca-Cola Co. with certain agreed upon services for a maximum of 18 months to enable Coca-Cola Co. to assume management of CCBPI " San Miguel said.

Also under the agreement San Miguel is not to produce soft drinks sports drinks energy drinks and/or flavored water for five years so as to not compete with Coca-Cola.

According to analysts the sale will increase San Miguel’s war chest to fund its expansion in the Asia Pacific region. In 2005 San Miguel bought Australian companies National Foods and Berri Ltd. the latter a juice maker. It already has various breweries in Hong Kong China Vietnam and Malaysia. In 2006 rumors were floated that San Miguel was going to reopen its brewery in Saipan. This was denied by a Journal source close to Ramon Ang president of the food and beverage firm. (See “Brewery idea loses forth” in the March 20 2006 edition of the Journal.)

This is the second time San Miguel is unloading its stake in Coca-Cola Bottlers Phils Inc. Under the chairmanship of Andres Soriano III San Miguel sold its stake to Coca-Cola Amatil of Australia in 1997. Under the helm of Eduardo Cojuangco Jr. however San Miguel reacquired its stake in 2001. 

Analysts now believe that San Miguel decided to unload its shares in the local bottler due to the decreasing sales for the soft drink brand. They noted a shift in drinking habits of Filipinos as more sales have been registered for health drinks such as iced tea and fruit juices. Universal Robina Corp. for example claimed that in 2006 its iced tea variant C2 also being sold on Guam already outsells Coke in the Philippines.

In 2005 Coca-Cola Bottlers Phils Inc. sales fell 8% to 520 million cases pulling down its revenue by 7% to 40 billion pesos ($816.3 million) and operating income by 63% to 1.2 billion pesos ($24.5 million).

Coca-Cola Bottlers Phils Inc. holds the franchise to produce Coca-Cola products in the Philippines and owns Cosmos Bottling Corp. and Philippine Beverage Partners Inc. makers of as Sarsi an old-fashioned carbonated sarsaparilla drink previously owned by the RFM Group of the Concepcion family.

San Miguel is a leading producer of beer dairy and poultry products in the Philippines and Southeast Asia. In the nine months to September 2006 its profit rose 6.1 billion ($124.5 million) up only by 7% from $5.7 billion pesos ($116.2 million) the year before. At the stock market its "A" shares reserved for Filipinos closed at 67.50 pesos ($1.38) on Dec. 29 up 1.51% from its previous day closing price of 66.50 pesos ($1.36) apiece. Its "B" shares reserved for foreigners was up 3.33% to 77.50 pesos ($1.58) from 75 pesos ($1.53) per share the day before. MBJ