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    Sweetzelle Ira Arago
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    San Miguel Corporation acquired a majority 68% stake in Petron Corporation. SMC President Ramon Ang stated that the company plans to increase its stake to as much as 90% if given the opportunity, as they see Petron as undervalued with good opportunities over the next two years. While the acquisition increases SMC's cash flow volatility and negatively impacts its credit profile, it is a strategy to transform SMC's business. Petron contributed 59.8% of SMC's revenues in 2012, a significant increase from the previous year. The acquisition could boost SMC's credit rating if the business transformation is executed prudently and the new investments are successfully integrated.

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    Business critic about San Miguel Corp.

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    San Miguel Corporation acquired a majority 68% stake in Petron Corporation. SMC President Ramon Ang stated that the company plans to increase its stake to as much as 90% if given the opportunity, as they see Petron as undervalued with good opportunities over the next two years. While the acquisition increases SMC's cash flow volatility and negatively impacts its credit profile, it is a strategy to transform SMC's business. Petron contributed 59.8% of SMC's revenues in 2012, a significant increase from the previous year. The acquisition could boost SMC's credit rating if the business transformation is executed prudently and the new investments are successfully integrated.

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    © All Rights Reserved
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    10 views3 pages

    Financial Management

    Uploaded by

    Sweetzelle Ira Arago
    San Miguel Corporation acquired a majority 68% stake in Petron Corporation. SMC President Ramon Ang stated that the company plans to increase its stake to as much as 90% if given the opportunity, as they see Petron as undervalued with good opportunities over the next two years. While the acquisition increases SMC's cash flow volatility and negatively impacts its credit profile, it is a strategy to transform SMC's business. Petron contributed 59.8% of SMC's revenues in 2012, a significant increase from the previous year. The acquisition could boost SMC's credit rating if the business transformation is executed prudently and the new investments are successfully integrated.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 3

    C5

    Arago, Sweetzelle Ira P.


    III-CAC
    News Article:

    Reference:
    https://ph.news.yahoo.com/smc-completes-acquisition-68-petron-20101216-090053-722.html

    Summary:
    San Miguel Corporation (SMC) acquired majority of the stakes of Petron Corporation
    which is 68%. According to SMC president Ramon S. Ang, the company is willing to buy more
    up to 90 percent, given that the conglomerate plans to raise its stake in Petron to as much as 90
    percent if given an opportunity by the Ashmore Group which still holds a block of the oil's firm
    shares. He also explained that they intend to raise their stake further because the price is very
    low and undervalued and because of the good opportunity they see in that company for the
    next two years.
    Nature of Transaction:
    San Miguel Corporation acquired majority stake of Petron Corporation.
    Financial Effect:
    According to Mr. Ken Chan, the transaction to
    acquire Petron is a strategy to transform its business, it
    will mean a higher level of cash flow volatility for SMC
    and a negative impact on its credit profile once the oil
    companys more leveraged balance sheet is fully
    consolidated.
    Based on the right photo I got from SMC's 2012
    Annual Report, Petron has the largest contribution in SMC
    having 59.8%, a 9.6% increase from 2011.
    This information is based when Petron Corp. posted
    revenues of P425 billion for 2012, a 55% improvement
    from 2011. While this improvement was partly driven by
    the consolidation of the newly acquired business in
    Malaysia, Philippine operations registered a 3% revenue
    growth over the previous year, benefiting from higher
    volumes and prices. Petron Malaysia reported P142 billion
    in revenues.
    Justification/s for the Decision:
    Moodys said that acquiring Petron shares could
    upgrade San Miguel if it completes its business
    transformation in a prudent manner, and successfully
    integrates its new investments, while at the same time
    maintaining a sound liquidity and credit profile.
    Reflection/Comment/Suggestion:
    I was amazed the way the SMC's President, Ramon S. Ang thinks. He really had these
    conceptual and diagnostic skills. Where he can see bigger opportunities in a company having a
    net loss. He made other company's weakness an opportunity.

    Reference:
    http://www.sanmiguel.com.ph/PDF/CMS_AR_PDF/2012_SMC_ANNUAL_REPORT.pdf

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