The Fishy GG?
Its a controversial transaction: The PCGG has converted its entire stake in San Miguel Corporation from voting common shares, to nonvoting preferred shares. The deal, the brainchild of SMC president Ramon Ang, effectively hands undisputed control of the company to the group of Eduardo Cojuangco, Jr. but allows the PCGG (who is managing the stake in trust for coconut farmers after it was sequestered in 1986) generous financial terms.
For one, the swap is done at a 45 percent premium to the prevailing price of the SMC shares. For another it provides the preferred shareholder an 8 percent annual return, which in these days of low interest rates is nothing to sneeze at. In round numbers, the PCGG shares are valued at P57 billion (more than $1 billion) and an annual dividend of over P5 billion. That’s a lot of beer.
In exchange, because the common shares are retired, it increases the voting power of the Cojuangco group to 65 percent, giving them almost a supermajority. All the they to do is buy up another 2 percent of the voting shares and they will have undisputed control of the company, WHETHER OR NOT it is proven that Cojuangco used ill gotten Marcos wealth.
And that, according to some farmers groups is the problem.
The shares were sequestered in 1986 on the suspicion that the Cojuangco and the coco levy shares in SMC were purchased using illegal or unjust means. The intent, aside from preserving the funds for the future benefit of coconut farmers, was to deprive Cojuangco of his control of the shares until it could be proven (or disproven) that he was not the real owner of the shares.
The PCGG decision effectively dismisses all of that by handing Cojuangco control of the company anyway, regardless of whether he used stolen money or not. Speaking to me on Business Nightly tonight, PCGG Commisioner Ricardo Abcede argues that the share swap effectively preserves the farmers’ capital. He has a point. Viewed purely in financial terms there would be no argument. But in doing so he belittles the second reason for the sequestration, which was to prevent Cojuangco from enjoying the fruits of his allegedly ill gotten wealth.
If the courts rule that Cojuangco’s purchase and control of SMC was not illegally done then there’s no argument. After all, SMC has been better run by Cojuangco than by any of its previous owners. But what if it was ill gotten wealth and the use of farmers funds that allowed him to acquire control of SMC? Then there’s a problem. Joey Faustino and the Coconut Industry Reform Movment argue that the share swap should not have been entered into until the fundmental question of who owns those shares is resolved. Faustino too has a point.
Going beyond the share conversion, it must be said that the PCGG has spent the last 23 years going after the Marcoses and the Cojuangcos in a way that has disspiated the initial goodwill and credibility that it had with the public. From Jovito Salonga’s “losing” a briefcase full of vital evidence against the Marcoses in 1987 to Ric Abcede’s partying with Imelda Marcos in 2006 there have been suspicions that the PCGG was more interested in gaining political leverage and making lucrative deals with cronies than in bringing alleged crminals to justice and recovering allegedly ill gotten wealth.
If you think about it, dragging out these cases in the way that the PCGG has is an injustice to everyone. The Marcoses and Cojaungcos have never been found guilty by a Philippine court but are generally believed by the public to be guilty. Their assets remain under the control of a government that uses it as a political bargaining chip with them. The human rights victims still have not seen one penny of compensation. The credibility of our justice system has been greatly diminished and the public has been unable to move on for an entire generation because the cases have been left hanging.
Given this climate, its easy to believe that the PCGG has sold out and someone in the palace got a big fat commission for allowing the deal to go through. Its easy to beleive that all of these other cases will be resolved in favor of the accused in the near future.
Maybe the best thing to do is to allow the deal to go through, but turn the money over directly to the real farmers so it can be used for their benefit. No one will be completely happy with that solution, but everyone gets something and we can all move on. Of course, if we find out that someone got a cut for approving this deal, then all bets are off.
October 8th, 2009 01:49
Ricky,
Fishy GG! Brilliant title! (seriously big fan of your acerbic wit)
Would laugh if the rest of the post wasn’t so damn depressing.
‘but turn the money over directly to the real farmers so it can be used for their benefit’ - now I’d give up my middle nut if the farmers actually benefit from this fiasco.
Please keep ‘em coming. Your blog is my family’s local version of “The Daily Show”. Thanks for helping keep us sane.
October 8th, 2009 03:12
compared to other blue chip stocks, the daily trading volume of smc is very low. looks like big players are avoiding the stock as the perception in the market is that the current controlling group is cutting up the company into a hundred different, unrelated pieces.
you do that to hide your crime and make a killing on the side.cut-up the company and rearrange it into a maze of unrecognizable parts.
al capone caponed the real owners of the stocks-the coconut farmers with the cooperation of this administration on its 11th hour.
instead kicking out the thieves, this government willingly allowed itself to be gagged, bounded on the bed and shafted senseless.
the government did not resist the scam.not
the government appointee to the board, the brilliant, the corporate hotshot ms. lani mercado wife of the equally brillant senator revilla.
isnt it a crime to do sado masochism in public?
October 8th, 2009 09:51
and i read somewhere that the brilliant ms. lani mercado hasn’t even met the coconut farmers she is supposed to represent..
October 8th, 2009 10:40
RICKY “Uncle” :
You are so witty!
Your headline is such a grabber.
Ric Abcede will not like it!
EQ
October 8th, 2009 11:23
Thanks Mac Estrada and Equalizer.
When people ask me who I admire in my industry overseas they are surprised that I don’t say Anderson Cooper or Chistiane Amanpour, but John Stewart and Stephen Colbert.
For your info, Abcede challenged Faustino to a debate on the merits of the share swap.
I think both have valid points to make and Faustino has accepted the challenge. Am currently making arrangements to get them together on my programs Business Nightly and the Big Picture.
October 8th, 2009 13:04
Again I say,
WE ARE BEING SLAPPED AROUND BY THIS ADMINISTRATION - WITH IMPUNITY !!!
October 8th, 2009 13:42
Ricky,
You said: “After all, SMC has been better run by Cojuangco than by any of its previous owners.”
In my opinion, the only reason it appears that SMC is being better run now than by any of its previous owners is because SMC now enters into shady and sweetheart deals with this administration that enables it to diversify and grow faster.
Also because it had the coco levy farmers’ funds to play around with at the start. Take out the farmers’ funds and where would Cojuangco be?
Go back to Marcos’ time. Before being a Marcos crony, where was Danding Cojuangco? What were his businesses? Were they really that big? Were they really that successful? Which businesses did he really grow organically on his own, from scratch?
I think it was only when he started cozying up to Marcos and succeeding administrations (except Cory’s, naturally) that he was able to grow SMC. And as his Pacman monicker indicates, he doesn’t grow his own businesses, he gobbles up others’ businesses. And now using SMC as his gobbling machine.
In short, it was his gobbling up of the coco farmers’ funds that got him to where he and SMC is now.
So I don’t think he should be given credit for such type of managing.
October 8th, 2009 13:45
Oh ..I’m not familiar with stocks and market shares, I am an ordinary OFW working hard to gain for my family knowing that my country is full of corrupt officials…I have heared from news about Danding being so rich with all these money they got from Marcos which is originaly from the people of the Philippines..While they get so rich for the interests of this money then the Filipino shoulders debt servicing for this same money…
Ang lakas kasi ng loob ni Marcos mangutang…ngayon patay na sya tayo naghihirap pa rin bayad sa utang…
After pla ni Marcos si GLORIA MAKAPAL ARROYO na pinakamalakas mangutang…
October 8th, 2009 13:56
Phil,
When Danding retook control of SMC after he returned, he initially pared down its debt and expanded its food and beverage business overseas. Investments in Australia, China, Vietnam, and other countries were generally sound investments that were paying off.
The decision to diversify away from F and B and into mining and infrastructure is gradually undoing these initial directions and the market doesn’t like that ( and neither do I).
I say that not to defend him or to excuse what he may have done, its just an observation. I could be wrong.
October 8th, 2009 14:45
I don’t like it, too, Ricky. SMC diversifying into businesses where the government can most likely hold you by the neck until you cry Charlie.
SMC was a respectable and reputable company in the hands of the previous owners. Now it is gaining a reputation for shady sweetheart government deals.
Going back to one of my questions.. Just what businesses did Cojuangco have before he became a Marcos coco crony? How big and successful were these? That’s something of interest.
October 8th, 2009 15:50
Hi, Ricky. I’ve been lucky enough to catch your 10:30 show for the past two days. The discussions to do with riverbank communities intrigue me much. While I do agree that the migrating poor shouldn’t be allowed to settle too close to ill-managed waterways, I also recognize problems in completing quick flood-remedies like clearing up the banks without addressing the persistent issue not just of poverty but labor surge to market-central Manila. But for the moment, I’ll be zeroing in on the question of how we might maximize topography and sustain riverside communities.
Some are of the opinion that it’s best to leave the riversides uninhabited. I suppose, if construction and population clogged waterways (canals, lakes, rivers, bays) or are allowed on banks without care for potential rises in water levels, then crises like Ondoy would follow and persist. Problems would also emerge if we build on generously margined shores but the bodies of water behave like Yangtze. If the river-clearance rule were to be followed (is it twice the width of rivers on each side?), the communities by the Thames, the Nile, the Danube, the Rhine, and the Ganges wouldn’t be possible (I wouldn’t be surprised if the scientists are in much disagreement–the factors to weigh or gauge by aren’t constant after all). So my question is, how can we, in the storm-beleaguered tropics, manage our floodways without deserting our bodies of water? Won’t feats of engineering (which naturally will need lots of money) tide us over this? Japan had the problem of earthquakes and storms that had to be dealt with if they were to speed up commutes between two far flung islands. They built hanging bridges that were fit to endure the strongest chronicled winds and tremors ever to hit the areas. They didn’t abandon their islands and close them off to residents and commerce. I suppose, with the proper amount of well-guarded funding backing up efforts at ingenuous thinking, we can care for our rivers and gain from them without keeping them at too cold a distance.
How do we, in the tropics, embrace our rivers? Here are photos of the Rivers Danube http://ow.ly/tiXt Nile http://ow.ly/tiYi Rhine http://ow.ly/tiYt Thames http://ow.ly/tiYU
Many thanks and cheers,
Bee
October 8th, 2009 16:17
ricky,
san mig beer used to be the number one beer in hongkong. the smc people use to take pride in that hongkong is the gateway to biggest market in the world-china. not anymore.
i think the big chunk of the beer division was sold to kirin of japan and the proceeds was used to acquire convulated, unrelated types of businesses including acquiring shares of meralco in ally with winston garcia of gsis to spite the lopezes. thats a publiclicly listed company being used to exact vengence on his and gloria’s political enemy.
thats unacceptable.
and by converting the peoples common shares of stocks to non-voting preferred share he effectively took control of the company without a single shot being fired courtesy of gloria and pcgg.
diversification into other non-core business may or may not be a good strategy. only time can tell.but diversification to hide and muddle real ownership of a company is criminal.
control of smc is what its all about.
if you don’t own it, but you control it, its as good as yours.
October 8th, 2009 17:22
bee,
Thames riverside community protected by North Sea monitors, Thames, Dartford barriers, several other small locks and breakwater islands, lots of water gates, and a dedicated river telemetry system.
Even so, flood engineers fear the protection afforded by the current system may prove inadequate in as little as 10years. And the river still gets stinky in low water seasons.
It took a lot of political willpower, technological know-how AND financial might for England to come up with their water control system; which nowadays can hardly keep up with nature’s demands.
Big problem right now is Laguna de Bay flooding – different hydrodynamic requirements compared to the rivers you’ve mentioned but essentially, our country doesn’t have the political willpower, technological know-how OR financial might to keep the surrounding lake estate safe for habitation.
The only water control system we have right now consists of blatant denial and prayer.
October 8th, 2009 22:34
ricky,
surprised that you have not been apprised that the PCGG’s charter had already been changed to PCGI (President’s Commisions from Good Investments)!
i would have wanted to say that this presidential commission had already outlived its usefullness, but on the contrary–it has never been useful, in the first place, other than shifting business power from one group to another.
now that everything stinks around our communities, compliments of Ondoy, this blog now seems boring to me… (sori ricky–pun intended!).
October 9th, 2009 02:26
hi ricky,
this is off-topic but i just want to congratulate you for your interview of gm manda of llda. you were able to ask critical questions without embarrassing your guest. i like your style a lot & i am one of your biggest fans.
liza morales
October 9th, 2009 04:06
Ricky:
May nagbabantay ba sa mga relief donations na nanggagaling sa mga mauunlad na bansa sa Pamahalaan ng Pilipinas. Baka paghati-hatian lang ito mga miymebro ng PALAKA…
Ang mga relief donations sa SAGIP-KAPAMILYA laging naka-broadcast sa mga news ng Current Affairs pero iyong mga donations ng United Nations at ng iba’t ibang mauunlad ng bansa ay parang walang napupuntahan. Mabibigyan mo ba time na alamin ito bilang isang miyembro ng media dahil tungkulin po ng media na ipalam sa mamamayan kung saan napupunta ang mga donations na iyon.
Maraming salamat sa kaunting panahon na mai-uukol ninyo para ipa-alam sa mamamayan ang mga ito.
October 9th, 2009 09:38
RICKY(Uncle)
Under BOSS Danding, SMC is virtually in the “Buy N Sell” Business. SMC has No Strategic Focus!
1) BUY:San Miguel’s first major acquisition under Cojuangco and Ang was Australian boutique brewer J. Boag and Son for A$96 million in 2000.
SELL:In November 2007, SMC sold Boag’s to Lion Nathan for A$325 million.
2) BUY: In 2004,it bought 51 percent of Berri Ltd., Australia’s top juicemaker, for $97.9 million. In 2005, the company made its biggest purchase with the takeover of National Foods Ltd., Australia’s largest publicly traded dairy, which it bought for P80.38 billion.
SELL: In 2007, SMC sold National Foods to Kirin for ¥294 billion.
3) BUY:In 2005, SMC completed its $420-million purchase of Singapore-based Del Monte Pacific Ltd., the world’s largest pineapple canner.
SELL :In 2007, it sold its minority stake in Del Monte, a processed food group, to joint venture partner NutriAsia for $150 million.
4) BUY:In 2001, the company decided to buy back, in a transaction involving P60 billion, the Coca-Cola business that Soriano III sold to Coca-Cola Amatil. San Miguel ended up owning 65 percent of CCBPI.
SELL:In 2006, San Miguel has sold its 65% stake at its Coca-Cola Philippine venture (including its subsidiaries Cosmos Bottling and Philippine Beverage Partners) to The Coca-Cola Company (TCCC) for $590 million
October 9th, 2009 13:56
The return of Danding to economic and political power is almost complete.
Should any of his presidential horses win the race next year, the power will be full and complete.
Like the Virgina Slims ad says: “You’ve come a long way, baby”… since you jumped into the chopper with Marcos in 1986.
October 9th, 2009 21:07
What i didn’t get was Abcede saying that SMC is letting the government keep their seats in the board. Can it be guaranteed, what would their function be, who they represent now, do they maintain any power?
October 10th, 2009 08:50
Will SMC Be The Philippine Version Of ENRON?
October 10th, 2009 11:30
Equalizer, I sure hope not. For the sake of the ordinary stockholders.
Yes, Enron was buying and diversifying and zooming to apparent dizzying financial success with the help of creative fraudulent accounting and fooled the stockholders, the US government and the world. And finally crashed at the same dizzying pace.
October 12th, 2009 11:47
Surprise, surprise.
The once fiery, then turned see-no-evil, hear-no-evil GMA supporter Senator Joker Arroyo has finally found his voice.
Joker has told Gloria to halt the PCGG and SC approved conversion of SMC shares.
According to the senator, Gloria obviously knew about the deal and approved it. But she has the power to also halt it…This scheme will lead to corruption within a corruption, he says.
Never too late to once again ride your white horse, Joker. We need all the heroes we can get.
October 14th, 2009 06:57
The clear beneficiaries of the recent Supreme Court ruling on the conversion of coconut levy-funded common shares to preferred shares status are two: firstly, the San Miguel Corporation, and in particular Danding Cojuangco’s group that now has greater control of that firm.
The second beneficiary may be the Government of the Philippines, and in particular the Secretary of Finance who may yet be able to use up on paper a good few scores of billions of pesos more to assuage the expected multi-billion-peso fiscal imbalance.
The coconut farmers may also become beneficiaries of the decision (COCOFED et al. v. REPUBLIC OF THE PHILIPPINES et al. Supreme Court, G.R.Nos. 177857-58) but only after a few things are accomplished.
Up to the point of the Supreme Court ruling, the farmers were benefitting somehow, directly and indirectly, from the dividend earnings accruing from their San Miguel Corporation common shares – some one billion pesos a year – in that these were remitted and deposited with certain trust accounts maintained with UCPB’s Trust Business Group and used to fund additional working capital for the CIIF Oil Mills, pay the premiums for life insurance policies granted to coconut farmers, and fund various coconut replanting and farm development programs and projects.
This recent court decision, however, expressly states that the net dividend earnings on the converted shares, which would expectedly be four times higher than those of the hitherto common shares, should now be deposited in an escrow account in the name of the Republic of the Philippines and remain in custodia legis until the final ownership determination by the Supreme Court.
In other words, the farmers’ side that had indirectly been receiving some one billion pesos in dividend earnings per year from the common shares and was now expecting to receive some four or more billion pesos per year from the converted shares may end up with nothing for the immediate unless the PCGG does something rather urgently – namely, get its lawyers (the Office of the Solicitor General) to file immediately with the Court the appropriate motion for clarification and reconsideration to adequately address this concern of express permission for immediate utilization of dividend earnings to accomplish the mandates under law (PD 1468) all for the benefit of the coconut farmers.
During the National Consultations with farmers’ groups in the months of August and September 2009, the urgent common concern was for greater and more genuine participation by the coconut farmers in the control, direction and disposition of all coco-levy-funded enterprises. It is becoming almost settled doctrine that these funds are, as the Sandiganbayan had declared on May 27, 2004, “owned by the government in trust for all the coconut farmers” or, as the Supreme Court said on November 16th 2005, “prima facie public funds imbued with public interest.” By approving the sale of the ownership character of the CIIF SMC stocks and their conversion from common to preferred, the Supreme Court was clearly approving an act of ownership as opposed to a mere act of administration by the PCGG even as they emphasized that the question of the ownership of those shares was far from settled, it being “obviously only a preliminary finding”(in the words of the Supreme Court), to allow the PCGG to vote the sequestered shares.
Such actuations by the Court are again being taken by farmers’ groups as an urgent invitation to find ways to reach an equitable amicable settlement, or face the grim alternative of waiting for finality in the mother case (CC No. 0033), which the Court may yet take a long time to dispose of. This amicable settlement has been discussed for many years now and the Government of the Republic represented by the President has already agreed explicitly to the formula of setting up a Government-owned-and-controlled Foundation that will, however, welcome up to 49% voting rights by coconut farmer representatives chosen by the farmers themselves.
President Arroyo has called this “51-49” Foundation the “Capalla” formula because of the moral leadership by Davao Archbishop Fernando R. Capalla in the formulation of this agreement that recognizes both the public character of the coco-levy funds and their true beneficial owners who are the coconut farmers themselves, now demanding greater and more authentic participation in the control, direction and disposition of what truly belongs to them – an agreement initialed by all members of the PCGG en banc at the same time they were approving the conversion of San Miguel shares from common to preferred with clear intentions of declaring that, to the PCGG, all coco-based wealth must ultimately redound to the farmers’ benefit.
After the recent Supreme Court ruling, the group most insistent on the “private” character of the funds has already manifested to both the PCGG and the rest of the farmers’ organizations that they are willing to enter into this amicable settlement. When the Court receives at last the joint motions from all parties to the case manifesting agreement to the amicable settlement- compromise agreement, which the PCGG will certainly urge on all concerned, there will be every reason for all coconut farmers to rejoice for there is no underestimating the long-lasting beneficial effect of such an agreement not only for coconut farmers and the coconut industry but also for the Philippines as a whole.
October 14th, 2009 07:04
August 28, 2009
The Honorable Chairman and Commissioners
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT
IRC Bldg #82 EDSA Metro Manila Philippines
Dear Sirs:
First of all, please accept our sincerest gratitude for your speedy response to our letter of August 10th requesting you to ask San Miguel Corporation (SMC) to postpone the deadline for availment of the program of “conversion” that they had earlier offered to the CIIF-UCPB group of companies. SMC President Ramon Ang immediately accommodated the formal request of PCGG Chairman Camilo Sabio postponing the closing date to 21 September from 20 August 2009.
Secondly, we hereby reiterate the reason for our current communications with PCGG, namely, the express recognition by Her Excellency, President Gloria Macapagal Arroyo of the role of BUPPFALUC in tackling coco-levy-related issues, even to the point of her mentioning this fact in one of her SONAs (State of the Nation Address). We have in BUPPFALUC the organized coconut farming sector morally assisted by Catholic, Protestant and Muslim moral leaders.
As soon as we learned rather belatedly about the above-mentioned SMC offer to CIIF – we immediately moved for a direct consultation with representatives of the ultimate beneficial owners of the CIIF SMC common shares on 17- 18 August 2009. We met rather lengthily and came up with a plethora of questions for the Presidential Commission. We hope these can be of help to you for any decisions you may have to make very soon.
MOTIVES
Would PCGG agree with BUPPFALUC’s reading of SMC motives for the “conversion” program as centered on SMC’s need for bigger funds for “the Company’s thrust to develop new engines of growth and diversify into new businesses”(quoted from SMC’s Prospectus for Modification or Exchange of Securities)?
SMC has become so big and successful that it must “further augment the gains it has realized from nurturing its current core businesses” (ibid.) with investments in “non-core “ business companies, such as oil refiner Petron, power distributor Meralco, telecommunications holdings Liberty, infrastructure building and maintenance Laiban Dam, etc.
Does PCGG therefore agree that while SMC already enjoys billions of pesos of funds extracted in the past from the coconut farmers of the Philippines, it needs billions more at the present to fuel its ambitious expansion and diversification program, and that theirs is the understandable feeling that SMC would be even much more credit-line-rich and investment-attractive if big chunks of its capital stock were “de-sequestered” in fact if not in name?
WHAT “SEQUESTERED” MEANS
Does the PCGG remember – BUPPFALUC is sure it does – that on May 27, 2004, the Sandiganbayan in Case No.0033-F issued a Partial Summary Judgment stating that “xxx the CIIF Block of San Miguel Shares of Stock totaling 33,133,266 shares as of 1983, together with all dividends declared, paid and issued thereon as well as any increments thereto arising from, but not limited to exercise of preemptive rights are declared owned by the government in trust for all the coconut farmers and ordered reconveyed to the government”?
Does it equally remember – again BUPPFALUC is sure it does –that on November 16th 2005 the Supreme Court, in an attempt to resolve “the correct characterization of the coconut levy funds, i.e. whether they are public or private funds”, wrote that although it had earlier held (in Republic v. Cocofed) “that the coconut levy funds are prima facie public funds imbued with public interest, such a pronouncement [according to the court] is obviously only a preliminary finding”, to allow the PCGG to vote the sequestered UCPB shares? So, “the question of whether the coco levy funds are public or private is intertwined with the principal issue” in the mother case (CC No. 0033), which the Court may yet take a long time to dispose of.
In the light of the foregoing, the question of BUPPFALUC quite bluntly is: does the PCGG think it has the authority to approve the conversion of CIIF-SMC common shares to preferred shares? Does PCGG think the Republic now owns those shares? Isn’t BUPPFALUC’s understanding correct that such “conversion” eo ipso constitutes a loss of ownership rights on the part of the erstwhile holders of common shares? And, therefore, would not the often-quoted Supreme Court line from Republic v. Sandiganbayan (192 SCRA 743) apply again at this time:
“The sale of sequestered property, which is an attribute of ownership, is ordinarily not within the ‘preservation and conservation’ aspect of the PCGG’s administrative objectives.xxx Hence, the proper court authority, i.e. the approval of the Sandiganbayan, is a conditio sine qua non to the sale…the lack of which constitutes a grave abuse of discretion on the part of the PCGG and would render the sale null and void.”
Does PCGG remember that in the above ruling the Supreme Court prohibited any change in the condition of sequestered assets as much as possible and held that the character of the sequestered assets should be preserved pending the final determination of the true owners?
BUPPFALUC asks: does PCGG have any doubt at all that there is a sale involved behind the esoteric process of conversion? Does PCGG see that there is here a special kind of sale, with no cash involved? Isn’t it obviously a sale as there will be selling costs that will be deducted from the first quarterly dividend – costs like brokers’ commissions and VAT thereon, sales transaction tax, PSE and SEC fees, and Special block fee transaction fees?
Consequently, will the CIIF not lose all its voting rights after this transaction, which therefore can only be construed as sale of the ownership character of the CIIF SMC stocks? And on the part of the PCGG will it not constitute an act of ownership as opposed to a mere act of administration, allowing SMC to assume control of the CIIF block, stripping the government’s nominees of any voting power in the board, if their presence will even be tolerated at all? The relative exchange value of the hitherto common stock could, indeed, remain “sequestered” but can the fact be denied that a fundamental change in the condition of the sequestered assets would have had taken place through an [illegal] act of ownership on the part of the PCGG – an act disenfranchising the original shareholders bringing about a new status of sequestration-in-name-but-not-in-fact, in exchange for what may even be interpreted as promises without guarantees?
ECONOMIC ADVANTAGE IN WHAT SENSE, FOR WHOM?
The SMC, the Department of Finance, the OSG, and the current managers/administrators (UCPB-CIIF) of the CIIF-SMC stocks seem to be all one in proclaiming the economic advantage of the conversion program. Thus, BUPPFALUC asks PCGG: has there been any serious study at all submitted to the Presidential Commission on the economic superiority of the conversion program and how the farmers can be assured of effective benefits-sharing? Does PCGG remember that the President of the Philippines tasked it and the DOF to work together with BUPPFALUC for the amicable settlement of all coco-levy-related cases, and, therefore, BUPPFALUC asks: what is the relation, if any, of the current conversion program to that much-touted amicable settlement effort wherein the President many times announced her desire to have a Foundation established that would initially give the farmers 49% voting rights in the disposition of all coco-levy-funded enterprises?
In PCGG’s view, does BUPPFALUC get it right when it reads in the papers that DOF Sec. Teves is pushing hard for the share swap as “this would result in additional income by way of interest income,” always worrying legitimately, sure enough, how to plug this year’s expected P250 billion plus budget deficit, and that the OSG merely echoes this when it tells PCGG about the concern for conversion being so “pressing considering the current global financial crisis and how it is expected to affect the Philippine financial situation?” (July 30’09 OSG letter to PCGG)
Should not PCGG rather be constantly reminding all and sundry that in accordance with law “the proceeds from the levy shall be …a separate trust fund which will not form part of the general fund of the government” (Sec.1, P.D.276)? Therefore the government of the Republic should not too easily consider itself the absolute owner of the levy funds – public as these funds truly are – but, rather, should merely consider itself a Trustee of such funds for the real beneficial owners who are the farmers themselves from whence the funds came in the first place and whose participation in their disposition the incumbent President has publicly desired many times for implementation by PCGG, the DOF, the help of BUPPFALUC and, above all, the consent of all the parties to the relevant cases needing to be amicably settled.
Does PCGG appreciate with BUPPFALUC that the hefty, super-block of ownership stock of 753,848,353 representing some 24% of total outstanding common shares of the SMC are almost the exclusive conversion target market of SMC because even when SMC announces a bigger target for conversion like, say, 1.104 billion Class “A” and Class “B” common shares representing up to 35% of the total outstanding shares of the Company, the CIIF group nonetheless represents almost 70% of that total target?
Is this the reason why SMC can make the offer attractive to CIIF, first through a good price for each share - Php75 versus a market price of Php51.50, which should be appreciated as sufficiently dramatic – representing, as it does, a 47% jump in value of share holdings instantaneously?
Second, SMC promises a higher dividend yield of 8% on the 75-peso value compared to the current yield of 2%. Would that not be a good few billion pesos more per annum? As of 31 March 2009, SMC had Php97.863-billion in retained earnings, of which Php5.554-billion had been earmarked for projects. At the current rate, then, the CIIF Holding Companies already stood to earn over One Billion Pesos in dividends for this year alone. Can you blame some CIIF managers who immediately jumped on the conversion offer considering that they’ve been so dependent on the generous dividends the SMC Board gives them from time to time – with PDIC having had to rescue UCPB a couple of times and even Coco-chem now hardly operational?
But isn’t BUPPFALUC right in its reading that there are no absolute guarantees, no sovereign guarantee, nothing – just SMC’s “good name” behind the attractive offer? To reiterate, isn’t it correct to say that the Board of Directors of SMC, stripped of your nominees, shall have sole discretion to declare dividends on those Series “I’ Preferred shares, and that those preferred shares are “non-participating”, meaning they are not entitled to any participation or share in the retained earnings remaining after dividend payment shall have been made on Series “1” Preferred?
CONCLUSION
Honorable Chairman and Members of the Presidential Commission on Good Government, thank you for your patience in reading through and seriously considering this plethora of questions for you from BUPPFALUC. We trust that you would adopt or recommend a sequence of measures that would first implement the aforementioned agreement between government and farmers prior to any fundamental ownership changes of sequestered assets. The foremost moral concern of BUPPFALUC is how the farmers will finally be given their chance to participate in the benefits deriving from their toil and sweat expressed in the coconut levy of yesteryears. It is one thing to talk about increasing the value of their funds in varying degrees of acceptable risk. It is another thing to quite as reasonably ensure the gains already made – a professional judgment call. Does PCGG think this is currently satisfied? Most important of all, however, is the coconut farmers’ right to have a say on the disposition of their own funds. What the President and they have already agreed to, if implemented by the concerned agencies starting with the PCGG, must certainly be a consideration prior to all others.
For the Bishops Ulamas Priests Pastors Farmers and Lumads Conference,
Charles R. Avila
Spokesman
October 15th, 2009 23:58
Ricky,
With the recent flood in Metro Manila, I think the present government should create a body that will look for a long term solution. This will entail big amount of funds but we need to this to avoid another disaster. Also with the congress who is hungry for publicity , this is the exact timing and make a legislation and create a law which will see to it that this problem will be solved.
November 1st, 2009 15:22
The return of Danding Cojuangco and Lucio Tan.
PCGG promised Lucio Tan that all will be okay before GMA term ends.
November 1st, 2009 15:24
We see from truthaboutluciotan.blogspot.com that Lucio Tan will be even more powerful because the fishy GG is on the side of Kapitan.