Disgraced businessman looks certain to return

By Cecilia Quiambao, Bangkok Post 7 July 1998

Manila—He left the country in 1986 with Marcos, his political patron as he rose to become the Philippines's most powerful business executive, and now Eduardo Cojuangco is back.

Joseph Estrada won the presidency, but Eduardo Cojuangco may have snared an even bigger prize as politics and big business both underwent a passing of the torch in the Philippines last week.

For while former movie star Estrada inherited the government's near empty coffers, his tycoon friend seems poised to take over San Miguel Corp, Southeast Asia's largest food and beverage firm.

The past month has seen a stunning reversal for Mr Cojuangco, an estranged cousin of former Philippine president Corazon Aquino who was evacuated from the Philippines and into ignominious exile in 1986 aboard a US marine helicopter with former dictator Ferdinand Marcos as his distinguished fellow passenger.

The bulk of his wealth since then has been tied up in government litigation: a 20 percent personal stake in San Miguel, now worth at 23 billion pesos (about 19 billion baht), and an 18 percent shareholding in United Coconut Planters Bank (UCPB), the country's fifth largest financial institution. The two governments previous to that of Mr Estrada, led first by Mrs Aquino and later by Fidel Ramos, alleged in court that these shareholdings were acquired fraudulently using the proceeds of a government levy on coconut products.

The ill fortune of the man widely regarded as Mr Marcos's biggest crony appeared to change after Mr Estrada won the May 11 election with the aid of Mr Cojuangco's financial and still formidable political clout. As his reward, Mr Cojuangco was elected chairman last month of the new ruling party, called the Laban ng Masang Pilipino (Lamp).

Then Andres Soriano resigned abruptly last week as chief executive officer of San Miguel, paving the way for a possible return to the company of Mr Cojuangco, its former chairman.

The boardroom upheaval was unfolding amid the larger political drama being directed by the country's new president, who earlier sparked protests by proposing that Mr Marcos's remains be buried at a cemetery for war heroes here in what was unanimously interpreted as an attempt to revise the former president's now reviled place in history.

Mr Estrada also has pledged to abolish the Presidential Commission on Good Government, the state entity that went after the alleged ill-gotten wealth of Mr Marcos and his cronies, and expressed a desire to resolve the court case tying up San Miguel, which generates four percent of the country's gross national product and accounts for six percent of its tax revenues.

Mr Estrada has said these changes did not mean Manila would abandon its legal claim over the sequestered assets of Mr Marcos and his cronies. And during the election campaign he vowed that he <q>will not lift a finger</q> to help Mr Cojuangco gain control of his assets. However, an out of court settlement with Mr Estrada's blessing would pretty much amount to the same thing.

Mr Soriano's reason for leaving was unspecified, but it marked the end of his family's stewardship of a company founded by his great-grandfather in 1890. By the time he left he owned just two percent of the firm, but had managed to stay at the helm, with his own management team, owing to his good graces with the previous two governments.

However it came amid the declining fortunes of the company, which had embarked on an ambitious and ultimately costly $425 million (17.85 billion baht) investment binge abroad during his 12-year term that is now being unravelled by the Asian financial crisis.

<q>Investors were displeased at the way he managed the company,</q> said Cilette Liboro of stock broker Orion Squire Capital Inc.

A special anti-graft court last month allowed Mr Cojuangco to vote using his sequestered shares, which are worth three seats on the 15-member San Miguel board. Along with the 27 percent block of shares allegedly purchased with coconut levy funds and shareholdings in several state financial institutions, the government had controlled eight seats.

Mr Cojuangco, who breeds race horses in Australia and fighting cocks at his homestead in the central Philippine island of Negros, could presumably replace Mr Soriano as chief executive if the legal question over his shares, along with those coconut levy shares, were resolved. Mr Estrada could then direct the government nominees on the board to back Mr Cojuangco, said analysts.

Mr Estrada's predecessor, Fidel Ramos, had actually ordered the coconut levy shares, now worth an estimated $1 billion (42 billion baht), be auctioned off to bolster the National Treasury.

Even Mr Soriano, at the company's shareholders meeting earlier this year, urged the government to resolve the issue of the sequestered San Miguel shares, which had prevented the company from raising equity capital due to a provision in the 1986 sequestration order which prohibits the dilution of the affected shares. To finance its projects, San Miguel had been forced to resort to borrowings.

The market appeared to cheer the prospect of a Cojuangco return. The list price of <q>B</q> shares in San Miguel, which can be bought and sold by locals as well as foreigners on the Philippine Stock Exchange, surged six percent on Friday after Mr Soriano's decision to leave was announced.

The Soriano legacy, a string of breweries and packaging plants in Hong Kong, China, Indonesia and Vietnam that comprise 15 percent of company assets, has—save for the Hong Kong plant—been the biggest drain on its bottom line.

With the Asian economies surging and the Philippine economy at a standstill earlier this decade, the foreign sorties had at first looked like a master stroke. When Asian currencies collapsed, however, they largely took San Miguel down with them.

The company chalked up huge operating losses from its overseas brewing operations in the last calendar year, driving down the group's net profits by more than 50 percent to 2.96 billion pesos (2.4 billion baht).

It was not immediately clear whether Mr Cojuangco would pull the plug on the overseas expansion, but one of his nominees in the San Miguel board, Estelito Mendoza, has been critical of that strategy.