April 16, 2010 3:00 am
It should not be long before Filipino beer drinkers find that the company that makes their favourite brew, San Miguel, is no longer majority-owned by a Philippine company but by a Japanese brewer.
Next month, San Miguel shareholders will be asked to vote on a proposal to allow the country's biggest food and drinks maker to sell more than 51 per cent of its core food and beverage businesses in order to fund more ventures in heavy industries that offer higher yields and growth potential.
San Miguel began an ambitious diversification drive in 2008, buying half of the Philippines' biggest petrol refiner and almost a third of its largest electricity retailer, in the most significant strategic shift in its 120-year history. This year, it bought a power plant and invested in a toll road project.
To fund the ventures, the company is selling almost half its equity stakes in flagship companies, including San Miguel Brewery, which sells nine out of every 10 cans or bottles of beer in the Philippines.
Japan's Kirin Holdings now owns 48.3 per cent of San Miguel Brewery, but San Miguel has said it wants to retain majority control in the brewer and other core businesses.
That could eventually change if San Miguel shareholders, as expected, approve a board proposal to sell more than majority of its holdings in core businesses.
Déjà vu in Egypt
It is déjà vu all over again at Mobinil, Egypt's leading mobile telecoms group that is jointly owned by France Telecom and Egyptian businessman Naguib Sawiris' Orascom Telecom.
The two partners have been fighting a running battle for the past three years after Mr Sawiris triggered a dispute mechanism in their shareholder agreement. This was ostensibly linked to investment plans for Mobinil, but most saw it as an attempt by Mr Sawiris to eject his partner at a bargain basement price.
If so, his ruse came unstuck when an international court of arbitration found in favour of France Telecom in March last year and ordered Mr Sawiris to sell his entire stake in Mobinil's controlling holding company to the French. From this point on the dispute became mired in a domestic Egyptian legal battle, with France Telecom seeking to top up its controlling position by offering to buy out minorities in Mobinil's listed operating company. At the same time Mr Sawiris deployed his superior contacts with the Egyptian establishment to block every move by the French.
The deadlock seemed set to continue until the arrival of Stéphane Richard as the head of France Telecom at the beginning of last month. Mr Richard has had his hands full trying to resolve the internal crisis in staff morale. But he has also been keen to promote the French group's growing business across the Middle East and Africa. Indeed, his aim is to double revenues from the region over the next five years. A rumbling dispute that threatened to block progress in France Telecom's flagship asset in the area looked untidy, to say the least.
The agreement in principle announced late on Wednesday night will see the two partners substantially return to the status quo ante in terms of shareholdings. France Telecom will own 71.25 per cent of the controlling holding company and Orascom the balance. However, there will be a new shareholder agreement that should boost France Telecom's ability to roll out a new business plan for Mobinil, including new internet services, while tidying up Mr Sawiris' minority shareholder rights so as to avoid another protracted dispute.
The lessons of the clash - which has been closely watched by other operators keen to expand into high potential emerging countries - are pretty clear. On the whole, in order to operate effectively in such markets it is necessary to team up with a strong local partner. If you are lucky enough - as France Telecom has been - to become market leader, it is advisable to avoid falling out with your local partner.
In the event of a dispute, the rule of thumb is to settle quickly to save time, investor angst and fat fees for lawyers. The need to find another partner to help ease your way with local "customs" is likely anyway to lead you back to "the devil you know".
Mr Richard - who has something of a reputation as a smart tactician but none of the personal baggage with Mr Sawiris of his predecessor Didier Lombard - seems to have twigged quickly to this reality. Mr Sawiris will no doubt be happy to have avoided being ejected in his home country from a business as high profile as Mobinil. He will claim victory. In reality the saga is probably a draw in which only the lawyers can be said to have won as a result of the extra time.
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.