Diversified conglomerate San Miguel Corporation is planning to undertake a P12.66 billion tender offer for minority shares of Eagle Cement Corporation once the Philippine Competition Commission approves the P97.5 billion acquisition of the cement firm.

In a disclosure to the Philippine Stock Exchange, Eagle Cement said a share purchase agreement has already been signed between San Miguel Equity Investments Inc. and Eagle Cement’s majority shareholders led by SMC President Ramon S. Ang.

SMC is buying a total of 88.5 percent of Eagle Cement (4.43 billion shares) from Ang’s Far East Holdings Inc. as well share held personally by Ang, his son and SMC Director John Paul L. Ang, and daughter and SMC authorized signatory Monica L. Ang for P97.5 billion or P22.02 per share.

“The consideration was the result of negotiations between the Purchaser and the Sellers, and the basis for the negotiation and determination of the sale price was the valuation undertaken by an independent firm using global valuation standards. Payment shall be paid in tranches and in cash,” SMC said.

The closing of the transaction is subject to the approval by the PCC. As a result of the acquisition, SMC is required to conduct a mandatory tender offer of the shares of Eagle Cement held by its minority shareholders who hold 11.50 percent of the total issued and outstanding capital stock.

SMC said intends to file a request for exemptive relief with the Securities and Exchange Commission to allow the tender offer to start after the approval by the PCC.

Abacus Securities Corporation said the deal values Eagle Cement at 50 percent higher than the consensus target price on Bloomberg and well above the initial public offering price of P15.00.

“The stock never traded higher than P16.70 so a mandatory tender offer means everyone currently holding EAGLE stand to make money,” it noted.

“The acquisition of ECC offers a complementary approach to the current investment strategy of SMC in the cement industry, will increase its foothold in the cement business and provide the opportunity to implement its plan to expand its cement business,” said SMC.

Abacus said “one potential option for SMC once the acquisition is finalized is to merge Eagle with the conglomerate’s cement arm Southern Concrete Industries Corporation which is located in Davao.”

“This would increase Eagle’s capacity from 8.6MMT to up to 12.6MMT and would grant the company access to the Mindanao market,” it added.

The brokerage also pointed out that Eagle Cement’s public float will likely go down to zero after the tender offer and “we’re still awaiting management’s response on whether the intention is to remain listed or not.”