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Saturday, December 28, 2013

What Wall Street Can Learn From Ramon S. Ang

Ramon S. Ang
"Planes, fastest cars, companies, Ramon Ang has it all!"
Age: 59
Source of Wealth: Diversified
Residence: Manila, Philippines
Country of Citizenship: Philippines
Forbes Lists
#31 The Philippines 50 Richest

Vice chairman, president and COO of San Miguel, Ramon Ang debuts on list after buying an 11% stake in conglomerate from chairman Eduardo Cojuangco (No. 20) for $630 million last June, partly financed by debt. In 2007, he took charge of San Miguel's operations and started diversifying the food and beverage company into power, infrastructure, oil and gas. Company's shares fell on an IMF report that a big Filipino congloemrate was on brink of default; Ang denied that it was San Miguel though he has been selling assets. He also heads up Philippine Airlines, now 49% owned by San Miguel. He owns stakes in privately-held Eagle Cement and Diamond Hotel in Manila. Studied mechanical engineering and collects cars.From Forbes
High Stakes"Buy N Sell"?
Cojuangco and Ang have  been on an incredible international buying and shopping spree. It's one for Ripley's "Believe It or Not!" What are the strategic reasons for this approach?
Ang grew up far from the intrigue of high finance.
The son of parents who worked in the auto parts business, he started his engine-repair venture and taught himself how to create value from inexpensive things.
In high school, he took $250 from reselling engines to buy a used 1967 Pontiac Firebird. The deal cemented his love affair with sports cars and speed. Ang pursued mechanical engineering at Far Eastern University in Manila, graduating in 1982.
The 1980s were emerging as one of the most turbulent eras in the Philippines’ stormy history.
The country, stifled by Marcos’s declaration of martial law in 1972, was on the brink of revolt against the dictator, who counted the elder Cojuangco as his friend.
After opposition leader Aquino was murdered, the military backed a popular uprising in 1986. Marcos fled to Hawaii with the Cojuangcos and other allies. He died in Honolulu three years later.
The Cojuangcos spent a few months in Hawaii and then moved to California. Eduardo Cojuangco returned to the Philippines in 1989, resuming San Miguel’s chairmanship in 1998.
He rewarded Ang, who had kept an eye on his interests during the family’s exile, by naming him vice chairman in 1999 and president and chief operating officer in 2002.
Branching Out
With his patron back in charge, Ang set out to diversify San Miguel beyond its position as the nation’s biggest food and drinks company.From Bloomberg News
“We may also lower the (Philippine) ratings if problems at one of the large conglomerates impair investor confidence, or if political developments cause the government to veer from its commitment to improving governance.” Standard and Poor's
Standard & Poor’s has its own beefs with San Miguel. It downgraded the firm’s debt-rating outlook to negative from stable in May. The rating company said San Miguel underestimated debt by not adequately reflecting the financial lease payments of its new power business, SMC Global Power Holdings Corp. San Miguel also counted some preferred shares as equity, rather than debt, S&P said. From Bloomberg News
"Honesty is a very expensive gift!"
From Bloomberg News:
Ramon Ang, president of San Miguel Corp. (SMC), greets visitors to his eighth-floor Manila conference room wearing a plain black suit, white shirt, red tie and $200 Seiko titanium watch.
A billionaire who has diversified the 121-year-old brewer into the Philippines’ largest publicly traded company by revenue, Ang can afford a flashier timepiece. Yet the Seiko serves a purpose, Bloomberg Markets magazine reports in its December issue. Ang says he has a dozen of them so he can give away the one on his wrist.
“It’s very memorable for them if I take off my watch and give it to them,” he says of the recipients. “They will keep it for a long time and say, ‘This watch was given to me by my good friend Ramon.’”
Ang, 57, has always found ways to make an impression -- and a profit. At age 13, he was repairing Japanese auto engines and selling them for a 150 percent markup.
He won the trust of San Miguel Chairman Eduardo “Danding” Cojuangco Jr. after meeting Cojuangco’s son, Mark, in Manila’s auto-racing circles in the early 1980s.
Today, Ang owns more than 100 cars in one of Asia’s best collections. His favorite: a 1964 two-door roadster called an AC Cobra 289 FIA made by AC Cars that was restored by American race-car specialist Carroll Shelby.
“It’s the fastest muscle car,” says Ang, adding that the Cobra was once inexpensive as he jots down his top 10 list.
Ang is on a similar tear with his buy-and-improve approach at San Miguel, as Philippine President Benigno Aquino primes the country for growth.
Aquino, whose father was assassinated in 1983 after opposing dictator Ferdinand Marcos, wants to expand the economy as much as 8 percent annually. Gross domestic product surged 7.6 percent in 2010, the fastest pace since at least 1999.
San Miguel, which reported revenue equivalent to 5.4 percent of the Philippines’ GDP in 2010, is key to meeting Aquino’s target.
The company has already spent more than $4.8 billion on 24 acquisitions since the beginning of 2007, according to data compiled by Bloomberg.
San Miguel bought control of the nation’s top oil refiner, Petron Corp. (PCOR), from Ashmore Group Plc (ASHM), a London-based fund manager. In 2008, it took a 27 percent stake in Manila Electric Co. (MER), the nation’s biggest power retailer.
Gold-Copper Deposits
Last year, it paid $40 million for 10.1 percent of Australia’s Indophil Resources NL (IRN), which owns a 37.5 percent stake in the Tampakan project, one of the largest known untapped gold and copper deposits in the world. Ang also added three coal-mining companies.
The mining foray bodes especially well for the country, says Mark Mobius, who oversees about $50 billion as executive chairman of Franklin Templeton Investments’ Emerging Markets Group.
“We believe in commodities, whether nickel, iron ore or coal,” Mobius says. “That’s where the Philippines’ potential is.”
Ang has had run-ins with authorities during the pedal-to- the-metal expansion.
The Philippine Stock Exchange dropped San Miguel from its benchmark index in November 2010, saying the firm wasn’t meeting the requirement of publicly trading more than 10 percent of its shares.
Returning to Index
San Miguel returned to the main index on Sept. 12 after it sold stock and convertible bonds. It has a 4.3 percent weighting. The shares, which have more than doubled in price since Ang became president in March 2002, traded at 112 pesos on Nov. 2 after peaking at 185 pesos on Jan. 3.
The exchange has also questioned San Miguel’s public releases. Officials wrote to the company 32 times in the first nine months of this year, asking it to clarify information about acquisitions and other matters published in the media.
Philippine Long Distance Telephone Co., the nation’s biggest company by market capitalization and a San Miguel rival, received six inquiries in the same time.
The stock exchange didn’t impose any penalties on San Miguel during the period. It requires listed companies to disclose information to the exchange before releasing it to the media or to disclose the information simultaneously to the public.
San Miguel’s change in corporate ownership may further cloud investors’ ability to assess the company, says Christopher Leahy, a member of the secretariat of the Hong Kong-based Asian Corporate Governance Association, which represents investors who manage about $12 trillion of assets.
Top Frontier
Last year, San Miguel agreed to be taken over by Top Frontier Investment Holdings Inc., where Ang is chairman.
The Philippines-based holding company is controlled by San Miguel directors, including Roberto Ongpin and Inigo Zobel. Both have ties to the Marcos era: Ongpin was the dictator’s trade minister from 1979 to 1986; Zobel’s father sold his family’s San Miguel stake to Eduardo Cojuangco in the 1980s.
In last year’s deal, San Miguel bought 49 percent of Top Frontier. As of March 31, Top Frontier owned 67.2 percent of San Miguel common shares, according to the company’s share sale prospectus in April.
“This is not a structure that lends itself necessarily to transparency and good corporate governance,” Leahy says. “While they are good at running their business, they are not running it with the interest of minority shareholders at heart. If they were, they’d be more transparent.”
Ang says cross-ownership ensures San Miguel’s businesses and strategic undertakings continue according to management’s plan. In 1986, the government of President Corazon Aquino, the current president’s mother, took control of the company as part of an effort to recover the assets of Marcos and his associates.

For Leahy, San Miguel’s limited transparency points up a larger concern: The Philippines has the worst governance scores among 11 Asian nations, according to a September 2010 report called “CG Watch 2010” by his association and Hong Kong-based brokerage CLSA Asia-Pacific Markets.
“The issues of governance break down in the Philippines sometimes,” Leahy says.
Many securities laws in the Philippines lag behind international and regional best practices, according to the report.
For instance, under the Philippine Securities and Exchange Commission’s revised corporate governance code, companies are required to appoint two independent directors, or a number that represents at least 20 percent of their board.
‘Unaware of Problem’
Most Asian countries require three independent directors, or a number that represents a third of their board.
“Regulators and companies seem unaware of the problem,” the report says.
Ang says San Miguel complies with the regulations of his country’s stock exchange and securities and exchange commission.
“We always follow the rules,” he says.
San Miguel’s 2010 annual report states the firm’s view: “The company recognizes that the most cogent proof of good corporate governance is that which is visible to the eyes of its investors,” it says.
Standard & Poor’s has had its own beefs with San Miguel. It downgraded the firm’s debt-rating outlook to negative from stable in May. The rating company said San Miguel underestimated debt by not adequately reflecting the financial lease payments of its new power business, SMC Global Power Holdings Corp. San Miguel also counted some preferred shares as equity, rather than debt, S&P said.
From SMC Website

San Miguel’s president and chief operating officer talks about his own management style and the San Miguel way
What comes to mind as one of San Miguel’s main accomplishments in the last year? 

Overall I think it was a bumper year for San Miguel. Our businesses did very well. We had some difficulty in a few corners of the Group where performance could be better. We’ve faced down the issues of oil prices and the excise tax, which is going to have some effect on our beer and liquor business moving forward, but on the whole, it’s been a good year. We own the largest oil company in the Philippines and are now the country’s biggest producer of electricity alongside being the brewer of nine out of ten beers sold in the Philippines.

In March, we finalized our acquisition of ExxonMobil’s downstream business in Malaysia and are now proudly operating under the Petron brand—and perhaps even shaking up the petrol retailing business a little.

Here at home, San Miguel bought into Asia’s first airline, Philippine Airlines. Half a year on, we are now the Asian airline to watch, having bought 64 planes from Airbus.

By the time we are done, we will have one of the most modern fleets in the region. We’ve made improvements to everything from the menu to online bookings and ground service. We’ve begun flying to Toronto, and new destinations in the Middle East, Asia and Australia.

Do you find yourself less focused on the traditional core businesses than on the new businesses? 

Only because these businesses are much more established and I’ve worked with the management teams of these different companies for close to 15 years now. They know what I expect of them, and they know how I like things to be run. And to be very honest, they don’t need me there, hovering over them. They are very capable; the best in the business.

For the new businesses, we’ve created new work teams, brought in a lot of people from the outside, all of whom are still learning how to work within the San Miguel system and do things the San Miguel way. The new businesses are also in industries that are relatively new to us and generally more dynamic, in that there are a lot more moving parts and external forces at work, so I’m having to take the time to learn the businesses from the inside out. I think you’ll find that over time, I tend to turn over the reins to our managers. Two years ago, I’d sit down at least twice a week with the Petron team. Now I’m spending less time with them and more time with PAL, simply because it’s our newest investment and there’s a lot of work that needs to be done.

What do you mean when you say the “San Miguel way”? 

In many of our businesses we have parameters on where and how to compete and how to win to maximize things that are important to us, things like long-term value and steady growth that we can sustain and build on.

San Miguel is a great company and it’s driven by strong values that I don’t mind saying were here even before we took over in 1998. Things like the importance of good execution, operating with a great degree of integrity, investing in people and communities.

These days, I think our company is more and more appreciated for what we do and what we contribute to the economy. So I think that’s another value we havegoing for us: doing the right things for the long-term and for the greater good.

What sort of values do you think you’ve brought to this company? 

I don’t know if you would call it a value, but I think I’ve brought to this huge company a sense of what it is to be entrepreneurial. I ran my own businesses long before I joined San Miguel. None of them were quite as big, but I think the reason why they were successful was because we brought an element of entrepreneurship to them. There was a certain comfort with taking risks, going for the big idea and being really invested in what we were doing.

In a company as large as San Miguel, it’s sometimes difficult to get that level of commitment. Everyone’s always a bit detached. The level of ownership isn’t always there. It’s also that much harder to work up an appetite for risks because it is publicly held. I understand this. But I also like to dream big, and I think that’s paid off for San Miguel. I think, if anything, I’ve encouraged our people to take off their blinkers and challenge their own view of themselves and what we can do.

I’m also very results-oriented. I believe in accountability. So I think that’s worked its way down the line and changed the way we do things around here.

To a certain extent I think I’ve also brought a fresh new set of eyes to each business. Sometimes all that’s needed is a fresh take on things, the viewpoint from the outside. For instance in Philippine Airlines, it was relatively easy to decide that we needed to buy more planes. To keep the old ones was too expensive and not doing the PAL brand any favors. So we’ve invested in smaller wide-bodied planes that are more fuel-efficient. That way, we cut down on maintenance costs and don’t have to fly half-empty planes between routes.