December 8, 2006

San Miguel forms Vietnam hog venture with Hormel

Food and beverage giant San Miguel Corporation has sold a 49-percent stake in its agribusiness arm in Vietnam to Hormel Foods Corp. for US$20.48 million.

The Philippine Star daily reported the deal would result in a joint venture with Hormel to run San Miguel Pure Foods (VN) Co. Ltd., its feeds and hogs business in Vietnam.

In a disclosure with the Philippine Stock Exchange, the conglomerate said the joint venture would combine the expertise of San Miguel and Hormel in marketing, processing, technology and management in its pursuit to accelerate San Miguel's presence in Vietnam.

San Miguel acquired San Miguel Pure Foods Vietnam formerly TTC Vietnam Co. Ltd. in 2003 for US$35.5 million as its springboard into Vietnam's basic and processed meats market.

Hormel, based in southeastern Minnesota and the world-known maker of Spam luncheon meat, is San Miguel's long-time partner in processed meats and a multinational manufacturer and marketer of consumer-branded meat and food products.

San Miguel Vietnam's hog farming and feed milling facility in Binh Duong, one of the fastest growing provinces in Vietnam, was bought from the Taiwan Tea Corp in October 2003.

Analysts said the sale may help San Miguel, which makes nine of every 10 bottles of beer sold in the Philippines, pay debt. The food and beverage conglomerate has been buying companies at home and abroad to cut its reliance on beer and on its domestic market.

A US$3.6-billion expansion started in 2000 has inflated San Miguel's debts and raised financing costs.

Last year, San Miguel made its biggest purchase with the takeover of Australian dairy giant National Foods Ltd. This was followed by a US$420-million purchase of Singapore listed food processing firm Del Monte Pacific Ltd. through NutriAsia Pacific.

San Miguel also bought an additional 49 percent of Berri Ltd. to take full ownership of the Australian juice maker.