Top Frontier Holdings (TFHI) to list by way of introduction

James Ryan Jonas

Top Frontier Investment Holdings Inc. (TFHI), the single largest shareholder of conglomerate San Miguel Corporation (SMC) has secured approval from the Philippine Stock Exchange (PSE) to list its shares on the PSE next year.

Top Frontier Investment Holdings owns a major stake in SMC but, interestingly, the conglomerate SMC is also the biggest shareholder of Top Frontier.

Top Frontier is controlled by SMC President Ramon Ang and businessman Roberto Ongpin. Roberto Ongpin is currently the 14th richest Filipino in 2013 with a networth of $1.3 billion. Ramon Ang, in turn, is ranked 31st in the 2013 list of Richest Filipinos with a networth of $260 million.

DBP’s “behest loans” scandal

Ongpin was previously embroiled in a scandal involving supposed “behest loans” from government-owned bank Development Bank of the Philippines (DBP).

A pending lawsuit accuses Ongpin of taking out “suspicious” loans from DBP during the administration of President Gloria Macapagal Arroyo. Proceeds from the P660-million loans were said to have been used by Ongpin to buy DBP’s own shares in Philex Mining Corporation (PX), which Ongpin allegedly sold just one month later to Metro Pacific Investments (MPI) at a 64% gain.

The same shares gave MPI, controlled by businessman Manny Pangilinan, a majority stake in Philex.

“Cross-holding” issues

The listing of Top Frontier on the PSE by way of introduction was made possible through SMC’s issuance of its Top Frontier shares as property dividends to SMC shareholders.

In October 2013, SMC announced it is distributing all of its stake in Top Frontier, amounting to 49% or 240.2 million shares, as property dividends. SMC shareholders were entitled to receive 1 share of Top Frontier for every 10 shares of SMC held.

SMC President Ramon Ang said the move was a way of addressing the “cross-holding” or “cross-ownership” issue between the two companies.

Listing by way of introduction

The distribution of property dividends also paved the way for the eventual listing of TFHI on the PSE.

As per PSE rules, a company may list and trade its shares on the exchange through a variety of methods, including Initial Public Offering (IPO), Backdoor Listing and Way of Introduction.

Under the rules on Listing by Way of Introduction, an unlisted company may be listed on the exchange if its shares were distributed by way of property dividends by a listed issuer to shareholders of that listed issuer. This requirement was consummated when SMC distributed TFHI shares as property dividends to SMC shareholders.

With the distribution of property dividends, SMC will no longer own shares in Top Frontier, but the latter will remain as the biggest shareholder of SMC.

(Click here for more detailed discussion about the rules on Listing by Way of Introduction.)

About Top Frontier Investment Holdings

As an investment holding firm, Top Frontier owns 66% of San Miguel Corporation, which recently ventured out of its food and beverage industries under the helm of Ramon Ang.

Aside from its stake in SMC, Top Frontier is also the parent of Clariden Holdings Inc., a mining company that holds the mining rights for the Mt. Cadig nickel project, Lo-oc limestone project and Nonoc nickel project in Surigao del Norte, among others.

Apart from Ang and Ongpin, other major shareholders of Top Frontier include Inigo U. Zobel of Ayala Corp. and Joselito Y. Campos of Unilab Group of Companies.

Inigo Zobel is ranked 15th in the list of 2013 Top 50 Richest Filipinos, with a net worth of $1.2 billion, while Joselito Y. Campos is part of the Campos family which is ranked 18th in the Richest Filipinos list.

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James Ryan Jonas teaches business management, investments, and entrepreneurship at the University of the Philippines (UP). He is also the Executive Director of UP Provident Fund Inc., managing and investing P3.2 Billion ($56.4 Million) worth of retirement funds on behalf of thousands of UP employees.