Research by: Ma. Theresa P. Mañalac, Yusoph Maute, & Sandeep Puri
In May 2019, a retail investor in the Philippines had to decide whether or not to immediately sell his shares in Holcim Philippines, Inc (HPI). The San Miguel Corporation had just announced the acquisition of around 86 per cent controlling interest in HPI. The price of HPI had increased considerably in the months leading up to the acquisition announcement, and this investor was anticipating a large gain. Now, he needed to run a fair value estimate of HPI’s price using both the capital-asset-pricing-model-based discounted cash flow method and the comparable multiples method in order to decide what to do: Should he sell his shares at the prevailing market price, wait until the future potential tender offer, or hold his shares indefinitely?
This case is designed for a graduate-level introductory financial management course to teach corporate valuation in the context of an acquisition. After working through the case and assignment questions, students will be able to do the following:
- Assess the attractiveness of the cement industry in the Philippines.
- Evaluate the motivations of acquirors and target companies in the context of a proposed acquisition.
- Assess the attractiveness of a target company.
- Describe regulatory requirements prior to the completion of an acquisition transaction.
- Estimate the fair value price of a stock by applying the discounted cash flow method and the capital asset pricing model, and compare the fair value price to the prevailing market price and the acquirors’ potential purchase price.
- Use the comparable firm multiples method to estimate fair value price, and compare the fair value price to the prevailing market price and the acquirors’ potential purchase price.
- Make a recommendation about whether or not to sell a stock.
Setting: Philippines, Large, 2019
To cite this case: Mañalac, M. T. P., Maute, Y., & Puri, S. (2021). The Holcim acquisition: Cementing SMC’s leadership in the Philippines. Ivey ID: 9B21N006. London, Canada: Ivey Publishing.