Arriving early for the 10:30 a.m. interview at the San Miguel Corp headquarters in Ortigas center, I catch a glimpse of Ramon Ang, the 58-year old president of perhaps the country’s biggest and most diversified business group, walking around the anteroom to his office dressed in a T-shirt, black pants, and a pair of sandals.
During the interview, for which he puts on a dark jacket and slips into black shoes for the benefit of the photographer, he points to his simple working attire to stress that he does not need to dress up and attend a lot of formal meetings with subordinates to run the rapidly expanding conglomerate. San Miguel used to be mainly a food and drinks group but now has interests across a wide range of industries, from fuel refining and distribution to power generation, toll roads, airports, mining, and recently, an airline.
“The whole group is being run by professionals. I spend 40 percent of my time following up things to do with the existing management group,” he says. “That’s why I was just in a T-shirt and sandals earlier.”
People meeting Ang for the first time may be surprised by the lack of that officiousness that typically surrounds Filipino company bosses. Apart from his preference for simple office attire, his language is candid and informal; he addresses even first-time acquaintances as “pare,” Filipino for buddy. In the middle of the interview, he handed me his phone to show a text message to stress a point. I ask, in jest, if it was from MVP, the initials of Manuel V. Pangilinan, against whom he is usually pitted by the media. His reply was quick and witty: “Who’s that?”
The interview began, oddly enough, with him asking me what I thought of newspapers and television broadcasting as a business. Caught off guard, I replied that he might be better off buying a tabloid rather than one of the broadsheets, whose readerships are already in decline. Television, though, may still be a good business because it is still the principal medium of popular entertainment, I ventured to say.
Ang agreed that television entertainment remains a good business, but seemed daunted by the prospect of wading into what he considers the strange and muddy waters of show business. “I don’t know the star actors and actresses. They seem to live messy lives. But to get to know them well enough, you have to socialize with them,” he frets.
Coming from Ang, who has fearlessly ventured into new enterprises well beyond San Miguel’s core businesses, that comes as a bit of a surprise. He explains that what he’s really afraid of is what his daughters will say if they see him in the company of the pretty young things. “My daughters may no longer talk to me. I don’t think I’ll be able to do it. I’ll just get a lot of ribbing from my daughters, or even my sons.”
WHEN I FINALLY GET TO ASK QUESTIONS, I begin with his acquisition in early July of an 11 percent equity stake in San Miguel from Eduardo Cojuangco Jr. in a deal that has an implied market value of P27.6 billion, or over $650 million. I ask him how it feels to be the single biggest individual shareholder of San Miguel Corp, which made P535.8 billion in sales last year.
He says he does not feel any change because he still works as hard for San Miguel whether he has few or many shares. I find the answer a bit trite, and suggest to him that, surely, it should inspire more investor confidence in his leadership because the bulk of his personal wealth is now tied up with the company.
“Yes, it should inspire more confidence from other shareholders,” he agrees, “They’ll say: ‘The company president has a stake in the company himself so he’ll make sure to run the company well.’”
Interestingly, that also starts him off into a spirited discussion of how conflicts of interest of managers has been the undoing of many great companies, and how he has carefully avoided such pitfalls of corporate governance. “Even when I was just an employee in this company, I never encouraged friends, relatives to come and do deals with the company,” he says. “Not once was there a hint of such issues when I was running this company.”
My next question is foremost in the minds of many people, including Ang’s peers and rivals in Manila’s gossipy business community, after reports came out of his acquisition of Cojuangco’s share in San Miguel. Where did Ang get the money to buy the shares? I tried to frame the question more delicately, and so I asked him how he was financing the transaction.
I was not expecting an extended reply and would have understood if he refused to answer the question. After all, he is not a government official but a private individual entitled some measure of privacy. But to his credit, Ang outlined how he built up his personal wealth and why it is not totally beyond him to acquire Cojuangco’s stake in San Miguel.
“I never explained a lot of things to many people before, but I’ll explain to you,” he began, turning serious. I ask myself if that was a mild rebuke for asking a question that was perhaps a bit too intrusive. If it was, it seemed a small price to pay to learn how one of the country’s most well-known but also most enigmatic businessmen made his pile, so I kept silent and let him speak.
HE BEGAN BY RECALLING his participation in the acquisition of the Zobel family’s Fortune Cement in 1992 along with retail magnate Henry Sy Sr., who helped finance his investment in the cement plant in Southern Luzon. Fortune sold some shares through an initial public offering in 1996, raising $100 million for Ang and other shareholders. With the fresh capital, he was able to expand Fortune Cement, and bought into other cement plants such as the Floro family’s Mindanao Portland Cement in Iligan in Mindanao and Prime White Cement in Cebu
In 1998, he sold his remaining shares in Fortune Cement to Blue Circle Ltd, a U.K.-based international cement company, and got more than $200 million, which he then used to buy a cement plant in Sarawak in Malaysia. He also put up a new cement plant called Eagle Cement in Bulacan, which he describes as “the newest, biggest, and most modern cement plant in the Philippines.”
The survival and growth of his cement businesses are all the more remarkable because most local cement companies owned by prominent business groups and families were acquired by large global cement firms in the wake of the Asian financial crisis.
“If you ask, with all these, do i have the means to buy the shares? Of course I do.”
“If you ask, with all these, do I have the means to buy the (San Miguel) shares? Of course I do,” Ang answers his own question. But that does not imply he is selling his cement businesses to raise money to pay for Cojuangco’s shares that are worth more than $600 million. In fact, he used just $100 million of his money and borrowed the remaining $500 million from foreign banks, he reveals. “I expect to repay the banks from the appreciation of the value of my San Miguel share-holdings later,” he says. “Or, I can do an IPO of, say, 40 percent of Eagle Cement’s shares, and the debt can be paid in full.”
The block of San Miguel shares that Ang acquired from Cojuangco is no ordinary financial asset; it has been the subject of one of the longest and most bitter ownership disputes in the Philippines. This dispute stems from allegations that the San Miguel chairman bought the shares from the Ayala family in the early 1980s using funds from the United Coconut Planters Bank. The bank was built from government-imposed levies on coconut farmers and was headed by Cojuangco himself when the deal was done. The case was finally resolved in Cojuangco’s favor in April last year, after the Supreme Court ruled that the government failed to prove any irregularity when he ostensibly borrowed money from UCPB to buy the San Miguel shares.
With the complex history of the ownership of the SMC shares in mind—from the Ayalas to Cojuangco to Ang—I ask the San Miguel president what he intends to do with the shares when the time comes for him to retire. He says his initial inclination is to lodge some with a foundation, and leave some for his children. “In the future, whatever I have, I want to put in a foundation, to make sure that it can help many of our countrymen to go to school and get medical treatment,” he says.
SAN MIGUEL TODAY IS VERY DIFFERENT from the company it was three or four years ago, when it began a strategic shift to energy and infrastructure to sustain rapid revenue and profit growth. Food and beverages now account for only a third of San Miguel group’s revenue, from over 90 percent in 2009. In contrast, fuel and power, which made up only a little over a fifth of revenue in 2010, now account for almost two-thirds.
San Miguel is a diversified conglomerate made up of the country’s biggest petroleum refiner, Petron Corp, power companies, telecommunication companies, toll road builders and operators, an airport operator, coal mining companies, and, lately, the country’s flagship carrier, Philippine Airlines.
So, how does Ang manage such a large and diversified group? “All of San Miguel’s businesses have professional management teams who run the companies. My role is just to keep watch, guide, and remind them to always do better,” says Ang, who then goes on to enumerate about two dozen names of managers in charge of the group’s wide array of businesses. Many are recruits from other companies and the government. He says San Miguel’s managers are so effective that he spends more of his time thinking about new deals and acquisitions. “If I still have time after that, I walk around the shopping malls,” he said, getting a feel of the consumer pulse on the ground.
However, Ang is not a passive leader who simply inspires his managers and then leaves them to their own devices to implement the general direction and policy he has outlined. He says he encourages them to call or text him to inform him of any important developments. “They can call or text me even if it’s midnight,” he says, showing me a message that he received at around 10 p.m. the night before on his mobile phone.
Ang’s management style is quite complex and not reducible to a single precept. I press him to explain further by asking what he thinks about meetings. He says he has no patience to sit through long presentations where managers merely enumerate problems that they have failed to solve.
“That’s not my style,” he says. “I don’t wait for them to point me to problems that they expect me to solve. If that is what happens in meetings, you’re in trouble. It means you’re following your manager’s steps along the wrong path.”
His approach can perhaps be described best as management by instruction. He says: “We in top management plan what the operating managers will do. Here is what you must do and report to us the outcome of your efforts. Therefore, we are on top of the situation.”
I point out that his approach must require massive amounts of information available to top management. “No, not information but understanding,” he corrects me. “Our technical understanding of the business is deeper than that of our managers. If you have a deeper understanding than your managers, then they will all learn from you.”
Indeed, Ang puts so much of a premium on technical understanding of an industry that it is his No.1 consideration, ahead of financing, when deciding on acquisitions and expanding into new lines of businesses. It plays to his strengths—his education as a mechanical engineer and vast experience running cement companies, a most complex business that encompasses resource extraction, manufacturing and retail distribution.
“First, before you enter that business, you must think: do you have understanding and technical know-how? If you do, then go ahead if you have access to financial resources for investing.”
SAN MIGUEL HAS ITS FAIR SHARE OF CRITICS who point out that the company’s share price is performing well below the overall market benchmark, a sign that investors have fallen out of love with the company’s ambitious diversification strategy. The company is up only 5 percent in the first seven months of the year compared to the Philippine Stock Exchange index which climbed 25 percent, making it one of the world’s best performing stock markets.
It’s not the first time Ang has heard the criticism and he has a ready reply. “If you wanted to boost San Miguel’s share price by 40-50 percent, that’s very easy. All you have to do is boast about your plans even if that may be telegraphing some of your moves to your competitors,” he said. “Or San Miguel can buy back some of its shares and you’ll see its shares flying through the roof. But is that true (value appreciation)? Is that good?”
Another issue being leveled at San Miguel is its rising debt levels in recent years. Historically, San Miguel’s debt-to-equity ratio has mostly stayed below 1.0, meaning its debts were less than its equity capital. But the so-called solvency ratio is now hovering close to 2.0, raising some worries about San Miguel’s ability to pay back its debts.
Ang says San Miguel was in compliance with all its loan covenants, and thus there is no need to worry about the company’s ability to pay its debts. Indeed, he said the company was even a little slow in acquiring companies and incurring more leverage because its debts relative to earnings before interest, taxes, depreciation and amortization (EBITDA, a measure of income) was only 2.5 whereas the company was prepared to bring it up to 4-6.
“Not information, but understanding. If you have a deeper understanding than your managers, then they will all learn from you.”
The crux of the matter, according to Ang, is what sort of company shareholders want San Miguel to be. “I’ll give you a choice, do you want a debt-free San Miguel whose consolidated sales is only $2 billion, and which is earning from beer but losing on other businesses such as food, packaging and property?” he says. “That is the old San Miguel. Today, wow, the company is profitable in every business. There is no money-losing line business that just keeps on swallowing profits from lucrative operations.” Its total revenue has surged to over $12 billion, too.
THE INTERVIEW IS RUNNING BEYOND SCHEDULE, and Ang needs to attend another meeting. I ask him about something that was in the news that week: the Japanese businessman Kazuo Okada’s plans to partner with Philippine groups to build his casino resort along Manila Bay. He’s been known as Okada’s friend and I ask him if San Miguel would consider investing in the project.
His reply, heavy with moral undertones, was his most surprising statement that morning. “We won’t enter that business. If you put up a casino, whether in Singapore or the Philippines, 75 percent of the clients are domestic. You’ll be killing off a lot of domestic businesses and contributing to break-ups of marriages and families,” he says. He also points to the undesirable activities that usually accompany high-stakes gambling, including prostitution and proliferation of banned narcotic drugs.
I said I found his reply totally unexpected, considering he suggested the privatization of the Philippine Amusement and Gaming Corp last year and was even touted as one of the possible buyers. “That was merely a suggestion to stress the point that Pagcor should not be both a regulator and an operator,” he says, chuckling a bit. “I did not expect it to come out as a big news headline. It was just banter.”
Let that serve as fair warning from a man whose every word and every text message is treated as a potential news headline by a media hungry for a scoop. There is no point in second-guessing Ramon Ang.
This article originally appeared in Esquire's September 2012 issue. Minor editors have been made by the Esquiremag.ph editors.
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