Commission Decision No. 09-M-006/2020:
In the Matter of the Proposed Acquisition by Lotte Chilsung Beverage Co. Ltd.
of Shares in Pepsi-Cola Products Philippines Inc.

 

ABSTRACT:

The proposed transaction is the acquisition by Lotte Chilsung Beverage Co. Ltd. of up to 2,134,381,838 common shares of Pepsi-Cola Products Philippines, Inc. equivalent to 57.78% of the total issued and outstanding capital stock of Pepsi-Cola Products Philippines, Inc. through a tender offer to all shareholders of Pepsi-Cola Products Philippines, Inc. other than Lotte Corporation and the members of the Board of Directors with respect to their qualifying common shares and the officers of Pepsi-Cola Products Philippines, Inc. (the “Excluded Shareholders”).

Parties to the Transaction

The acquiring party is Lotte Chilsung Beverage Co. Ltd, a corporation organized under the laws of the Republic of Korea with principal office address in Olympic-ro, Songpagu, Seoul, South Korea. It is a company established in 1967 to engage in manufacturing and selling of soft drink, liquor, fruit/vegetable drink, cereal drink, and food and other beverages. On 21 June 1973, Lotte Chilsung Beverage Co. Ltd. listed its shares on the Korea Exchange. Lotte Chilsung Beverage Co. Ltd. is a subsidiary of Lotte, one of the principal shareholders of Pepsi-Cola Products Philippines, Inc.. As of November 30, 2019, Lotte Chilsung Beverage Co. Ltd. has a total of 7,993,460 common shares issued and outstanding, of which 2,121,660 common shares equivalent to 26.54% of its total issued and outstanding capital stock is owned by Lotte Corporation. Lotte Corporation is the single-largest shareholder of Lotte Chilsung Beverage Co. Ltd. Lotte Corporation is a corporation duly organized and existing under the laws of the Republic of Korea with principal office address in Seoul, South Korea. Lotte Corporation was organized in 1967 to engage in the confectionary, food and beverage, retail, and chemical business. In 2017, Lotte Corporation was formally established through the divestiture and merger of the four (4) public Lotte affiliates. The acquired party is Pepsi-Cola Products Philippines, Inc. It is a Philippine company engaged in the manufacturing, sale and distribution of carbonated beverages, non-carbonated beverages, and snacks in the Philippines. As of November 30, 2019, the authorized capital stock of Pepsi-Cola Products Philippines, Inc. is Seven Hundred Fifty Million Pesos (Php750,000,000.00) divided into Five Billion (5,000,000,000) shares of common stock, with a par value of Fifteen Centavos (Php 0.15) per share, of which Three Billion Six Hundred Ninety Three Million Seven Hundred Seventy Two Thousand Two Hundred Seventy Nine (3,693,772,279) common shares are issued, outstanding and fully paid-up equivalent to Five Hundred Fifty Four Million Sixty Five Thousand Eight Hundred Forty One and 85/100 (Php554,065,841.85).

a) Shares being Acquired and Manner of Acquisition

Lotte Chilsung Beverage Co. Ltd. intends to acquire up to 2,134,381,838 common shares through a tender offer to all shareholders of Pepsi-Cola Products Philippines, Inc. other than Lotte Corporation and the Excluded Shareholders. The common shares target of the acquisition represents approximately 57.78% of Pepsi-Cola Products Philippines, Inc.’s total issued and outstanding capital stock. The tender offer commenced at 9:00am on December 12, 2019 and had been expected to end at 5:00pm on January 15, 2020. However, Lotte Chilsung Beverage Co. Ltd. reserves the right to extend the tender offer period with the approval of the Securities and Exchange Commission.

b) Consideration and Basis for Consideration

Subject to the terms and conditions of the tender offer, Lotte Chilsung Beverage Co. Ltd.will purchase approximately all shares duly tendered at a price of Php1.95 per share, payable in cash (before deductions for the customary selling charges as set out in the terms and conditions of the tender offer, which shall be for the tendering shareholder’s account).

c) Intended Structure of Ownership and Control after Completion

After completion of the transaction, Lotte Chilsung Beverage Co. Ltd. may own up to 3,693,772,270 common shares of Pepsi-Cola Products Philippines, Inc. equivalent to 99.99% of the total issued and outstanding capital stock of Pepsi-Cola Products Philippines, Inc.

d) Business Objectives of the Parties

Lotte Chilsung Beverage Co. Ltd. is undertaking the tender offer as a strategic initiative to acquire a significant economic interest in Pepsi-Cola Products Philippines, Inc. Considering that in the event the terms and conditions of the tender offer as prescribed in the Tender Offer Report are met, the aggregate ownership of Lotte Chilsung Beverage Co. Ltd. and Lotte of the total equity securities of a public company will be over 50%, the tender offer is being undertaken in accordance and in compliance with Section 19 of the Securities Regulation Code (“SRC”) and Rule 19.2 of the SRC implementing rules and regulations which provide that as a consequence of any acquisition that would result in the ownership of over 50% of the total outstanding equity securities of a public company, the acquiring party shall be required to make a tender offer for all the outstanding equity securities to all remaining stockholders of the same public company at a price supported by a fairness opinion provided by an independent financial advisor, and the acquiring party shall be required to accept all such equity securities tendered during the tender offer. The tender offer provides existing shareholders the opportunity to sell their shares and realize their investment, in cash, at a premium to (meaning an amount that is more than) the current trading price. The tender offer price of Php 1.95 per share represents a 12.27% premium over the six-month volume weighted average price (“VWAP”) and 6.14% premium over the three-month VWAP of Pepsi-Cola Products Philippines, Inc.’s Common Shares.

e) Major Events to bring about Completion of Transaction

1. The obligation of Lotte Chilsung Beverage Co. Ltd. to purchase the tendered shares will be under the condition (among other conditions that it may prescribe) that during the tender offer, the common shares will have been:

(i) Validly tendered by Pepsi-Cola Products Philippines, Inc.’s shareholders other than the Excluded Shareholders;

(ii) Eligible for or otherwise capable of being purchased by Lotte Chilsung Beverage Co. Ltd.; and

(iii) Accepted for purchase by Lotte Chilsung Beverage Co. Ltd.; in each case, in accordance with the Tender Offer Condition. In the event the Tender Offer Condition is not met, the Bidder may, upon notice to the Securities and Exchange Commission and the Philippine Stock Exchange, withdraw the tender offer.

2. The accepted tendered shares are intended to be crossed at the PSE on or about February 7, 2020, subject to the following conditions:

(i) approval by the Securities and Exchange Commission of the request for exemptive relief to be filed by Lotte Chilsung Beverage Co. Ltd. with respect to the requirement under SRC Rule 19.9.7 which require the payment of the consideration offered or return the tendered shares no later than ten (10) business days after the close of the tender offer period;

(ii) approval by the Philippine Competition Commission of the notification form submitted by Lotte Chilsung Beverage Co. Ltd. and Pepsi-Cola Products Philippines, Inc. in connection with the tender offer; and

(iii) approval by the Philippine Stock Exchange of the crossing of the tendered shares.

f) Assets of the Acquired Entity and Entities It Controls

Based on the 2018 Audited Financial Statements of Pepsi-Cola Products Philippines, Inc., its total assets amount to Php26,172,640,000.00. There are no other entities controlled directly or indirectly by Pepsi-Cola Products Philippines, Inc.

g) Description of Operations without the Transaction

Lotte Chilsung Beverage Co. Ltd. intends to continue its operations in the normal course with or without the transaction/ completion of the tender offer.

 

1676618144_PCC_Commission-Decision-No.-09-006-2020_LottePepsiCola_26March-2020.pdf

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