The Philippine Competition Commission said Monday it approved the acquisition by Universal Robina Corp. of the sugar mill and ethanol facility of Roxas Holdings Inc. in La Carlota City, Negros Occidental.
The approval of URC’s acquisition of Central Azucarera de la Carlota Inc. and Roxol Bioenergy Corp. in Negros Occidental and shares in Najalin Agri-ventures Inc. came a year after the anti-trust body blocked a similar transaction over merger-to-monopoly concerns in Batangas province.
It said the transaction involves URC’s acquisition of CA-Carlota and Roxol’s sugar milling and bioethanol distillery plants and its parcels of land and shares held by RHI in Najalin Agri-Ventures. The anti-trust body approved the transaction on Sept. 3.
URC said in a disclosure to the stock exchange the purchase cost would be determined at the closing of the transaction and based on fair market value. RHI said in a separate disclosure it would use the proceeds from the sale to prepay all long-term debt and reduce short-term credits.
RHI said the sale of the La Carlota assets would also allow it to refocus its resources on rebuilding its sugar milling and refining facilities in Nasugbu, Batangas
The PCC said while URC and CA-Carlota were among the big players in Negros island, the transaction was not expected to lead to the substantial reduction of the competition in the sugarcane milling and tolling markets in the region and in the national market for bioethanol, wholesale raw sugar and molasses.
It blocked last year URC’s attempt to take over Central Azucarera Don Pedro Inc. and RHI, its sole rival in Batangas province, after a market investigation raised competition concerns over a monopoly of sugar milling services that might corner farmer-planters in their sharing agreements, sugar recovery rates and incentives in Southern Tagalog.
It said, however, that the acquisition by the same parties over the assets in Negros presented a different market environment where there are many players.
The PCC merger review found that unlike in the Batangas deal where sugar planters had to choose between two players and would have lost the benefit of competition in their merger, majority of Negros sugarcane farmers were working in associations with bargaining power where planters were able to switch to get the best price for their produce.
Competing millers in the area were known to respond accordingly in price and incentives to draw in the farmers’ haul and deal, it said.
Under the deal, URC is set to acquire all buildings, refinery and milling plants, other assets of CA-Carlota; the bio-ethanol plant of Roxol and the sellers’ 1,069,037 square meters and 391,826 square meters of land in La Carlota City.
URC will also take 520,115 Najilin common shares held by RHI and its nominee shareholders. URC is engaged in food related businesses, including branded consumer food, agro-industrial and the commodity food.
URC said the acquisition of RHI’s sugar milling and bio-ethanol distillery assets would create synergies in the sugar industry in Negros Occidental and enhance the capability of the company to provide good milling services to the sugarcane planters.
“Aside from the operational synergies that will be achieved between La Carlota and existing URC operations in sugar, the acquisition is also intended to help sugarcane planters increase their productivity, as well as help local communities in Negros Occidental by providing more opportunities. In addition, the acquisition will allow URC to continue in its efforts to support the development of the sugar industry in the Philippines,” URC said.
URC’s sugar division operates five mills and three refineries across the Philippines, with a combined milling capacity of 31,000 tons of sugar cane and producing 33,000 bags of refined sugar a day.
JG Summit Holdings Inc. is URC’s controlling shareholder and owns around 55 percent of URC’s outstanding shares. Meanwhile, CA-Carlota is a subsidiary of RHI and is engaged in the business of manufacturing sugar, molasses, syrups, sweeteners and other related products. Roxol is in the business of producing and selling of bio-ethanol fuel with RHI directly owning approximately 20 percent of the outstanding shares of Roxol, and approximately 80 percent ownership indirectly through RHI’s wholly-owned subsidiary, Central Azucarera Don Pedro, Inc.
RHI is a holding company heavily involved in agribusiness, particularly in sugar and ethanol production. It has majority ownership of Najilan with 67.1 percent of issued shares. Najilan is primarily engaged in agri-industrial development, with farmlands for lease in La Carlota City, Negros Occidental.
The share price of URC rose 0.79 percent to close at P140 Monday, while the stock price of RHI jumped 12.8 percent to P1.94. With Jenniffer B. Austria