Issue-plagued Holcim calls it quits
Credit to Author: BEN KRITZ, TMT| Date: Tue, 14 May 2019 16:32:20 +0000
SMC unit buys out troubled cement giant, ending weeks of speculation
A unit of listed conglomerate San Miguel Corp. (SMC) has agreed to acquire a controlling stake in Holcim Philippines Inc. (HPI), the country’s largest cement manufacturer, in a deal worth $2.15 billion.
The sale, announced by HPI and SMC subsidiary First Stronghold Cement Industries Inc. late Friday, confirmed rumors that had been swirling for weeks that the former’s Switzerland-based parent LafargeHolcim was seeking to shed its controversy-plagued local unit as part of a plan to rationalize its “non-core” businesses.
LafargeHolcim completed in February a similar sale of its Indonesian unit to local company Semen Indonesia, a deal reportedly worth $1.75 billion.
The acquisition of HPI has been in the works since at least early March, when SMC Chairman Ramon Ang announced that the company’s Eagle Cement subsidiary had made a bid for HPI. But as recently as May 3, HPI denied that a sale was in the works in a carefully worded disclosure to the Philippine Stock Exchange (PSE). In it, the company said it had not “received any official communication from any of its major shareholders regarding any offer with respect to the sale of their shares.”
Under the terms of the sale, First Stronghold will purchase 85.73 percent of HPI shares held by Union Cement Holdings Corp., Netherlands-based Holderfin BV and Cemco Holdings Inc. The SMC unit will also be required to conduct a tender offer for the remaining 14.27 percent of HPI shares.
SMC declined to comment on what impact, if any, the acquisition of HPI would have on the conglomerate’s Eagle Cement business. In a disclosure last Friday, Eagle Cement clarified that it had nothing to do with the buyout.
The transaction is subject to the approval of the Philippine Competition Commission (PCC) before it can be considered final.
Environmental, regulatory issues
HPI recently came under fire for a number of environmental and regulatory missteps, most notably the forced closure of its grinding mill in Mabini town, Batangas province and a P1.9-billion dispute with Bataan province-based Seasia Nectar Port Services Inc. (SNPSI) over the cement maker’s cancellation of an agreement on the exclusive use of a port facility.
HPI’s Batangas plant was ordered closed by the Department of Environment and Natural Resources’ Environmental Management Bureau office in Region 4A (Calabarzon) after it was discovered that the factory had no Environmental Compliance Certificate (ECC). The company does have an ECC for its Batangas site, but that only covers a bulk storage and port facility, not the manufacturing operations.
The municipal government of Mabini had refused to renew HPI’s business permit in 2017 due to the “non-compliance of its ECC,” but the plant continued to operate.
According to municipal administrator Gerville Luistro, the local government rejected the business-permit renewal after receiving numerous complaints from residents near the HPI plant about noise and dust.
The complaints, some of which date back to 2013, also allege that exposure to dust from the plant caused allergies and respiratory problems for some residents. Local residents and officials also accused HPI of damaging corals and other marine life.
In the SNPSI case, the port operator accused HPI of unilaterally canceling an agreement to use a port facility built to HPI’s specifications by SNPSI. SNPSI sought relief from the Regional Trial Court in Bataan, which ordered the garnishment of a P1.878-billion Metropolitan Bank & Trust Co. (Metrobank) account belonging to HPI in November 2018. HPI subsequently brought the case to arbitration through the Philippine Dispute Resolution Center.
Apart from the implications of the SNPSI dispute, HPI courted additional regulatory penalties for failing to disclose the garnishment to the PSE and the Securities and Exchange Commission, which was first reported by The Manila Times.
Labor dispute
HPI is also facing a complaint by more than 100 contract workers at its Davao City plant that they were illegally terminated after the company was ordered to regularize them in March.
They were employees of HPI contractor Fort Steel Cargo Integrators Inc.
The Department of Labor and Employment (DoLE) Region 11 ordered the workers regularized after finding that their work was directly related to HPI.
However, Fort Steel Cargo Integrators terminated their employment on March 4.
A representative of the Davao Holcim Employees Workers Union told The Times that DoLE was aware of the terminations, but had not yet acted on the workers’ complaint.
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