SMC-Kirin Agreement: Cojuangco's maneuvers to maintain control over SMC
Danding Cojuangco continues to lord it over San Miguel Corporation (SMC) in the newest scheme involving Kirin Brewery, a Japanese monopoly corporation. Cojuangco and his ilk in SMC sold 443 new stocks worth $540 million (P27.88 billion) or 15% of the company to Kirin. This was part of Cojuangco's backroom maneuvers to maintain and firm up his control over SMC. After a brief display of displeasure, the Macapagal-Arroyo regime fully supported the sale.
The sale of new stocks of SMC would increase the total equity shares and therefore decrease the percentages held by the present owners of the stocks. This scheme plans to dilute the control of government in the directorship of the company. The percentage of the sequestered stocks held by the government would decrease from 27% to 24%. The proportion of other government-owned stocks held by GSIS and SSS would dwindle from 11% to 9.6%. Therefore the entire block of stocks held by the government would decrease from 38% to 33.6%.
Cojuangco's direct shares in SMC would also decrease from 20% to 17.4%, but as a result of the agreement with Kirin, their shares would constitute a single block creating a 37.4% solid pro-Cojuangco stock vote, bigger than the government block. Another 30% of the shares are held by various stockholders represented and, in effect controlled by, the SMC management. Combined with the solid block of shares held by the Cojuangco-Kirin group, they would eventually control 67.4% of the shares of SMC and thus the votes to the board of directors.
Large blocks of stocks control proportional numbers of seats in the 15-person board of directors of SMC. Thus, the key to winning the fierce battle over the control of SMC is control over the number of representatives in the board of directors. Each of the 15 directors has one vote each. Kirin's purchase of 15% of the company's shares entitles it to two seats in the board. Under the terms of the sale, the two directors from Kirin and the three directors for Cojuangco are obliged to vote as one entity for the next five years. In addition, Kirin is bound to offer first option of purchase to Cojuangco in case it decides to sell its shares of the company. The various small stockholders of SMC have three proxy votes represented by SMC management directors and are therefore Cojuangco's minions. By count, Cojuangco has control over eight votes in the directorship. This exceeds the seven-strong block vote of the government by one vote, notwithstanding the appointment of PCGG representatives to replace the five pro-Cojuangco Estrada appointees.
Instead of opposing Cojuangco's schemes, Macapagal-Arroyo acclaimed it as the "first major direct foreign investment" in the country this year. Macapagal-Arroyo even went as far as to announce that she does not have any intentions of replacing Cojuangco as chairman of SMC. All attempts by the government to control SMC have therefore been nothing but gimmickry.
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