SMC’s Eagle Cement acquisition noticed to chop prices

SHARES in Eagle Cement Corp. are seen to rise with the planned acquisition of the cement maker by San Miguel Corp. (SMC), which in turn could see its input costs decline after the deal, analysts said on Wednesday.

“The tender offer could possibly prompt Eagle’s stock price to surge during the offer period, and is likely to plunge once it has ended,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

Separately, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the acquisition is important for SMC to reduce costs in its projects.

“Cement business is an important component to [SMC’s] various infrastructure projects, both ongoing and upcoming. This would help reduce input costs, especially for large infrastructure projects,” he said in a Viber message.

Both analysts said estimates placed the value of the acquisition at around P97.4 billion.

On Wednesday, SMC said that a special board meeting on Oct. 4 authorized the acquisition of 88.5% of Eagle Cement, which manufactures and distributes cement.

Both companies are chaired by Ramon S. Ang, who is also among the selling shareholders in Eagle Cement for P22.02 per share.

Eagle Cement separately said that its controlling stockholder, Ang-led Far East Holdings, Inc., was in discussions with SMC.

SMC said that the acquisition will trigger notification with and clearance from the Philippine Competition Commission (PCC) due to the value involved.

“[It has to be raised to the PCC] due to the large amount of transaction value involved as thresholds have been reduced recently, after being raised during the pandemic,” Mr. Ricafort said.

Last month, the PCC provisionally placed thresholds for mandatory mergers and acquisitions notification at P6.1 billion for the size of a transacting party, and P2.5 billion for the size of the transaction.

As defined by the PCC, size of party is the aggregate value of assets in the country of the ultimate parent entity of one of the parties to a transaction, while size of transaction is the value of assets of the acquired entity and the entities it controls.

“The conglomerate’s P97-billion acquisition for Eagle Cement is part of the business amalgamation of business tycoon [Mr.] Ang,” Mr. Limlingan said.

SMC and Eagle Cement both said that they would make additional disclosures in due time about the acquisition.

On the stock market on Thursday, SMC shares added P2.35 or 2.43% to P99 apiece, while Eagle Cement shares climbed by P3.16 or 20.52% to P18.56 each. — Justine Irish D. Tabile

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