‘Petron better off with SMC; government buyback unnecessary’

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MANILA, Philippines — With its “poor track record” in running businesses, the government should stay out of Petron Corp., as tycoon Ramon Ang is better suited to manage it – and perhaps even the country, analysts said.

Ang, chairman of diversified conglomerate San Miguel Corp. (SMC), renewed his offer last week to sell the country’s only remaining oil refiner back to the government amid the ongoing energy emergency.

Market analysts, however, told The STAR that a buyback may not be wise for the government given its limited fiscal flexibility and that it could merely unsettle market competition.

“A government takeover of Petron is not necessary. The better policy is to allow the company to continue as a well-managed publicly listed company so that it can serve customers more efficiently,” China Bank Capital Corp.’s Juan Paolo Colet said.

Concerns over fuel pricing or supply management, Colet said, could be addressed through alternative measures such as moral suasion or regulation.

Peter U of the University of Asia and the Pacific noted that the more fundamental issue is whether the government should be in that business in the first place.

“If the oil industry has sufficient competitors, competition will pressure prices down. The only way to sell cheaper would be to sell at a loss. If it’s a government corporation, who picks up the tab? Taxpayers,” U said.

“It would also be unfair competition for the private oil companies who may not have the deep pockets the government has. It would discourage new entrants and ironically reduce competition in the future,” he added.

The government previously held a 60-percent stake in Petron through Philippine National Oil Co. (PNOC), which acquired Esso Philippines – Petron’s old name – during the first global oil crisis in 1973.

In 1994, in preparation for the local oil industry’s full deregulation, PNOC signed a stock purchase deal with Saudi Aramco involving a 40-percent stake in Petron.

In the same year, PNOC sold its remaining 20 percent stake in what became known as the “mother of all initial public offerings” in the Philippines, attracting 500,000 shareholders.

SMC has been managing Petron since 2009 after acquiring a controlling stake from London-based investment fund manager Ashmore Group, which had earlier purchased a 40-percent interest from Aramco.

COL Financial chief equity strategist April Lee-Tan said the government privatized Petron in the 1990s, recognizing that the company would operate more efficiently in private hands.

“The government has a poor track record of managing businesses in general. Besides, acquiring a majority stake in Petron’s market capitalization would strain the national budget,” Tan said.

“Our current deficit and debt position aren’t very strong, as we have not yet recovered from the deterioration caused by the pandemic,” she added.

Currently, the SMC Group owns about 6.4 billion shares, representing 71.82 percent of Petron.

As of Friday’s closing, Petron shares were priced at P3.12 each, valuing the SMC Group’s majority stake at P19.97 billion.

Ang, who first made the offer to sell Petron in 2021, said the buyback could be carried out in tranches at fair market value. This would allow the government to avoid a large upfront payment.

“If the government accepts the offer, it will be a nightmare for the shareholders and investing public. Mr. Ang has a better track record in managing companies than government,” Astro del Castillo of First Grade Finance Inc. said.

“Much more, he is better qualified to run a country, given his group’s accomplishments and government’s history and well-documented failures in managing state-owned corporations,” he stressed.

Amid rising fuel prices, Del Castillo suggested that the government should instead support the private sector and focus on “better regulation, consumer protection and crisis management.”

In a chance interview last Friday, Ang assured the public that Petron would not take advantage of the ongoing crisis, even expressing his willingness to accept a lower income.