San Miguel Corporation, South-east Asia’s largest listed food and beverage company, bought Australian firm National Foods last May in what was one of the largest acquisition financings ever extended to a borrower from the Philippines. The deal was also the largest acquisition financing in Asia in 2005.
When New Zealand dairy group Fonterra made an offer for National Foods, San Miguel wanted to move quickly with a counter-offer. ABN Amro, Barclays Capital, HSBC, Standard Chartered and Sumitomo Mitsui Banking Corp were mandated as joint arrangers for a $1.85 billion, nine-month bridge facility.
The purpose of the bridge loan was to fund San Miguel’s acquisition of National Foods while “backstopping” or re-financing the Philippines firm’s existing debts.
“The key thing for San Miguel was that it had to put in its offer quickly”, says Philip Lipton, HSBC’s head of loan distribution for Asia-Pacific. Taking out a bridge loan allowed the company to raise funds quickly while gaining some time to plan its longer-term debt and capital structure, Lipton adds.
San Miguel made its bid for National Foods at the end of January 2005, offering National Foods’ shareholders 6.00 Australian dollars a share.
The bridge loan was opened to general syndication just over a week later at $1.85 billion and was twice oversubscribed. Besides the five mandated arrangers, 23 regional and international banks underwrote the loan. It was later down-sized to $1.75 billion since San Miguel’s funding needs turned out to be lower.
Fonterra made a competitive counter-offer of A$6.20 per share for National Foods, but San Miguel’s revised offer of A$6.40 to NFL was accepted.
It was a key deal for the market, according to Lipton, because: “There haven’t been too many acquisition finance deals in Asia of this magnitude.” He points out that the Philippines’ sovereign rating was downgraded shortly before the launch of the loan, in January 2005.
“I think it proved that if it’s a good transaction it doesn’t matter what country it’s in. The bankers will back it.”