The Securities and Exchange Commission ordered Lotte Chilsung Beverage Co. Ltd., a unit of the Lotte Group of South Korea, to halt its P4.16-billion tender offer on soft drinks maker Pepsi Cola Products Philippines Inc. due to a questionable fairness opinion report.
The SEC’s Markets and Securities Regulation Department in a letter ordered Lotte Chilsung to immediately stop conducting a tender offer to the minority shareholders of PCPPI and allow those who had tendered their shares to get them back.
The SEC said it issued the order because P&A Grant Thorton, which issued the fairness valuation on the tender offer, was also providing bookkeeping services to two companies related to PCCPI.
“The MSRD finds the business relationship of P&A Grant Thorton with the two entities where PCPPI holds substantial shareholdings could reasonably be perceived to undermine its independence to conduct and issue the fairness valuation,” the SEC said.
A valuation opinion compiled by a qualified investment banker or advisor evaluates the fairness of the price offered during an acquisition, takeover or merger.
PCPPI, meanwhile, said Lotte Chilsung did not intend to cancel or terminate the tender offer and was working with the SEC to clarify and resolve the concern raised on the qualification of the independent financial advisor.
“Once this matter is resolved, the bidder will re-open acceptance of PCPPI shares to be tendered,” PCPPI said.
Lotte Chilsung in December offered to acquire up to 2.134 billion common shares on PCPPI representing 57.78 percent of the company’s total issued outstanding capital stock at a price of P1.95 per share.
Lotte Chilsung owns an approximately 38.8-percent stake in PCPPI while US beverage giant PepsiCo Inc. holds 25 percent in the Philippine company.
Lotte Chilsung views the tender offer as an opportunity for shareholders to sell their shares and potentially realize their investment.
Lotte Chilsung is also conducting the tender offer as a strategic initiative that will enable it to acquire a significant economic interest in PCPPI.
Lotte Chilsung, one of the biggest beverage companies in South Korea, in 2010 acquired a significant stake in PCPPI after purchasing the combined holdings of Guoco Inc., Hongway and other minority shareholders.