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Cemco Case

The SEC ruled that Cemco must make a tender offer for shares in UCC, a publicly listed company, after it indirectly acquired 36% of UCC shares by purchasing shares in UCHC, UCC's majority shareholder. Cemco appealed, arguing the tender offer rule does not apply to indirect acquisitions. The Court of Appeals affirmed the SEC's ruling, finding that indirect acquisitions which achieve control over a public company are subject to the tender offer requirement. The issues are whether the SEC has jurisdiction over the complaint and whether the tender offer rule applies to Cemco's indirect acquisition of UCC shares through its purchase of UCHC shares.

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100 views

Cemco Case

The SEC ruled that Cemco must make a tender offer for shares in UCC, a publicly listed company, after it indirectly acquired 36% of UCC shares by purchasing shares in UCHC, UCC's majority shareholder. Cemco appealed, arguing the tender offer rule does not apply to indirect acquisitions. The Court of Appeals affirmed the SEC's ruling, finding that indirect acquisitions which achieve control over a public company are subject to the tender offer requirement. The issues are whether the SEC has jurisdiction over the complaint and whether the tender offer rule applies to Cemco's indirect acquisition of UCC shares through its purchase of UCHC shares.

Uploaded by

ronald
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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CEMCO HOLDINGS, INC. vs. NATIONAL LIFE 1.

Whether or not the SEC has jurisdiction over


INSURANCE COMPANY OF THE PHILIPPINES, INC. respondent’s complaint and to require Cemco to make a
tender offer for respondent’s UCC shares.
FACTS: Union Cement Corporation (UCC), a publicly-listed
company, has two principal stockholders: 2. Whether or not the rule on mandatory tender offer
applies to the indirect acquisition of shares in a listed
a. UCHC, a non-listed company, with shares amounting
company, in this case, the indirect acquisition by Cemco of
to 60.51%
36% of UCC, a publicly-listed company, through its
b. Cemco with17.03%.
purchase of the shares in UCHC, a non-listed company.
Majority of UCHC’s stocks were owned by BCI with 21.31%
HELD:
and ACC with 29.69%. Cemco, on the other hand, owned 9%
of UCHC stocks. YES. The SEC was acting pursuant to Rule19(13) of the
Amended Implementing Rules and Regulations of the
In a disclosure letter, BCI informed the Philippine Stock
Securities Regulation Code, to wit:
Exchange (PSE) that it and its subsidiary ACC had passed
resolutions to sell to Cemco BCI’s stocks in UCHC “ 13. Violation If there shall be violation of this Rule by
equivalent to 21.31% and ACC’s stocks in UCHC equivalent pursuing a purchase of equity shares of a public company at
to 29.69%. threshold amounts without the required tender offer,
the Commission, upon complaint, may nullify the said
As a consequence of this disclosure, the PSE inquired as to
acquisition and direct the holding of a tender offer.
whether the Tender Offer Rule under Rule 19 of the
Implementing Rules of the Securities Regulation Code is not 2. YES. Tender offer is a publicly announced intention by
applicable to the purchase by petitioner of the majority of a person acting alone or in concert with other persons to
shares of UCC. acquire equity securities of a public company.

The SEC en banc had resolved that the Cemco A public company is defined as a corporation which is listed
transaction was not covered by the tender offer rule. on an exchange, or a corporation with assets exceeding
Feeling aggrieved by the transaction, respondent National P50,000,000.00 and with 200 or more stockholders, at
Life Insurance Company of the Philippines, Inc., a minority least 200 of them holding not less than 100 shares of
stockholder of UCC, sent a letter to Cemco demanding the such company .
latter to comply with the rule on mandatory tender
Tender offer is in place to protect minority shareholders
offer. Cemco, however, refused.
against any scheme that dilutes the share value of their
Respondent National Life Insurance Company of the investments. It gives the minority shareholders the
Philippines, Inc. filed a complaint with the SEC asking it to chance to exit the company under reasonable terms,
reverse its 27 July 2004 Resolution and to declare the giving them the opportunity to sell their shares at the
purchase agreement of Cemco void and praying that the same price as those of the majority shareholders. The
mandatory tender offer rule be applied to its UCC SEC and the Court of Appeals ruled that the indirect
shares. acquisition by petitioner of 36% of UCC shares through
the acquisition of the non-listed UCHC shares is covered
The SEC ruled in favor of the respondent by reversing and
by the mandatory tender offer rule.
setting aside its 27 July 2004 Resolution and directed
petitioner Cemco to make a tender offer for UCC shares Whatever may be the method by which control of a public
to respondent and other holders of UCC shares. company is obtained, either through the direct purchase of
its stocks or through an indirect means, mandatory
On petition to the Court of Appeals, ruled that the tender
tender offer applies
offer requirement under the Securities Regulation Code
and its Implementing Rules applies to Cemco’s purchase The petitioner posits that what it acquired were stocks of
of UCHC stocks. Cemco’s motion for reconsideration was UCHC and not UCC. By happenstance, as a result of the
likewise denied. transaction, it became an indirect owner of UCC. We are
constrained, however, to construe ownership acquisition to
mean both direct and indirect. What is decisive is the
ISSUES: determination of the power of control. The

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