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(Article published in the Feb 4, 2009 issue of Manila Standard Today)

Atty. Roy Joseph M. Rafols, the Philippine Stock Exchange’s Chief Operating Officer and Head, Issuer Regulation Division and Atty. Pedro M. Malabanan, the Exchange’s Head, Disclosure Department, appear to have been remiss in their obligation to ensure that the investing public is fully informed about the material developments in listed company San Miguel Corporation.  If that perception is correct, then the Board of the PSE, in my view, should have, at least, censured them for sleeping on the job.

Instead of compelling San Miguel Corporation to make a “full, fair, timely and accurate disclosure” of the Option Agreement that presumably contains the heretofore beer company’s publicized intention to buy a controlling stake in Petron Corporation, Attys. Rafols and Malabanan seemed to have permitted San Miguel to limit the investing public to the latter’s carefully crafted and calibrated disclosures.  They appear to have in effect left the investing public, seeking to understand what is going on, with no recourse but to rely solely and exclusively on what San Miguel deigned it fit to reveal about the transaction.

Take or leave San Miguel’s word for it, the PSE’s disclosure people seem to say. That is no way, I submit, to keep the investing public’s confidence in the integrity of the Exchange. 


In fairness to Rafols and Malabanan, they, initially, were vigilant.  After the 05 January laconic disclosure by San Miguel, which revealed only the bare bones of the Option Agreement it had signed during the Christmas holidays with Sea Refinery Holdings BV, Rafols and Malabanan, through a series of requests for more information, were able to flush out additional details and thus enable the investing public to flesh out the initial skeletal announcement of San Miguel’s purported option.

On 07 January, SMC, on the prodding of Rafols and Malabanan, had to reveal that San Miguel’s source of funds to pay  for the purchase, if and when it does decides to buy, is “internally generated funds and, if necessary borrowings”.  San Miguel also added that the initials “BV,” after the name of the selling corporation,  meant the said company  was incorporated in the British Virgin Islands; that “there is no material relationship between SMC and its directors, officers and affiliates and SEA BV”; that UBS was the financial adviser of the transaction; that valuation analyses, i.e. those methods taught most likely in undergraduate business courses, are used to determine the acceptable price; and that no changes in the board and management will occur in Sea Refinery Corporation, the domestic company that holds the Petron Corporation shares. Two days later, Rafols and Malabanan also drew out from San Miguel confirmation that “SMC has committed to pay the Ashmore Group approximately $10 million as consideration under the Option Agreement.”

However, in neither of these early disclosures did San Miguel furnish the PSE with a copy of the Option Agreement.

On 12 January, Rafols and Malabanan, noting San Miguel’s omission, determined that the disclosures were not  yet “full, fair, timely and accurate”, and accordingly asked San Miguel for a long list of missing information, including “copies of all agreements duly executed that are relevant to the transaction…” 

San Miguel, in its January 13 response, simply gave more of the same and refused to provide the PSE with a copy of the Option Agreement.   It claimed that since the Option Agreement contained a confidentiality clause which effectively barred the investing public from gaining access to the document. Rafols and Malabanan reacting and riding their big white horses, read San Miguel Sections 1, 2, and 4.3 of the Revised Disclosure Rules, as well as quoted relevant provisions of the Listings Agreement signed by San Miguel on 26 January 2000, the combined import of which is to categorically impose on San Miguel the obligation to bare it all.  Rafols and Malabanan as befits regulators faithful to their calling, accordingly gave San Miguel a 24-hour ultimatum to show cause why it should not be penalized for violating the cited rules. San Miguel, as expected, acted as like it was BAU, or “business as usual.” Taking the show cause letter in stride, it casually requested for extension of time, up to the close of business hours of 16 January, within which to reply.

Something must have happened to Rafols and Malabanan after they had sent their 24-hour show cause letter. Like Saul of Tarsus, a big voice from above must have thrown them off their white horses and sent them crushing to the ground.

The PSE, instead of simply giving in to San Miguel’s request for a day’s extension, give it three days more, or until 19 January, within which to respond. In addition, ever so helpful, PSE provided San Miguel with a long list of specific information to supply.  But, in that list of “information for the guidance of the investing public”, the PSE was no longer anxious to get a copy of the Option Agreement.  All that the PSE wanted was its “key terms,” eight of which were specified.

When San Miguel replied on 19 January, some information, but not all that was requested in the PSE letter was provided to PSE.  Significantly, San Miguel did not, as it was required to do by the show cause letter, present any justification why it should not be penalized for violating Sections 1, 2, and 4.3 of the Revised Disclosure Rules, as well as the provisions of its Listings Agreement signed on 26 January 2000.

In addition to ignoring the show cause order, San Miguel continued to withhold a copy of the Option Agreement thereby continually precluding the investing public from the most expeditious way of verifying whether indeed the disclosures of San Miguel were in fact “full, fair, timely and accurate”.  By not so subtle an implication, San Miguel, by its defiance, reaffirmed its position that that its word on what the Option Agreement contains must be taken by the PSE and the public as a matter of faith.

PSE did not seem to mind being defied by San Miguel.  It continued with its stance of exemplary meekness and was content just “to request if there is a provision in the Agreement pertaining to the terms and conditions of payment of the exercise price of the shares.” And, if such provision existed, PSE was content if San Miguel were to “kindly provide the Exchange the complete information on the matter.”

Noteworthy, once more, is that PSE refrained from asking for a copy of the Option Agreement. It continued to be satisfied with being thrown, at San Miguel’s pleasure, bits and pieces about it.

On 26 January, San Miguel responded and described how the option was to be exercised. But in no uncertain terms, it told PSE  that that letter was going to be its last word on the matter. San Miguel’s Corporate Information Officer, Ferdinand K. Constantino, concluded his letter to PSE, as follows:

“With this response and our responses to the various prior requests for information and clarification of the Exchange, we deem that the Company has fully complied with the disclosure requirements of the Exchange, including Sections 1, 2 and 4.3 of the Revised Disclosure rules, in relation to the Option Agreement.”

“That’s all, folks. Now, please, shut up,” San Miguel seemed to say to PSE.

How can Rafols and Malabanan, who are the investing public’s first line of defense against the dark forces of the corporate jungle and the keeper of the gates, be permitted to take  San Miguel’s intransigence so meekly and with nary a whimper?

That’s it? No reprimand directed at Rafols and Malabanan from the PSE Board for not insisting that San Miguel show the Option Agreement itself?  That’s all?   The investing public gets from San Miguel, only what San Miguel allows it to get?

The state of affairs is not acceptable.  With due apologies to Marcellus of Shakespeare’s Macbeth, something is rotten in the state of the Exchange.