San Miguel Divests Interest in Nestle Philippines, Inc.

August 24, 1998 PSE CIRCULAR FOR BROKERS NO. 1952-98 August 21, 1998 SAN MIGUEL DIVESTS INTEREST IN NESTLE PHILIPPINES, INC. San Miguel Corporation (SMC), the Philippines-based beverage, food and packaging company, today announced it plans to sell its entire stake in Nestle Philippines, Inc. in a series of transactions that impute a value on San Miguel's stake in the total business at over P30 billion (US$700 million). The divestiture, which is subject to shareholder approval, will advance new management's restructuring of San Miguel's business portfolio, reflecting its focus on building actively managed businesses. San Miguel's Board of Directors voted in favor of the decision at its regular monthly meeting today and called a special shareholder meeting on November 12, 1998 to approve the transaction. The sale of its NPI stake signals a new strategy for "San Miguel, under Mr. Eduardo M. Cojuangco, Jr., who assumed leadership of the Philippines largest food and beverage company last July 8. "We are restructuring San Miguel's business portfolio with a view to moving away from businesses where we have a passive role and focusing instead on our core businesses and these areas where we can bring our competencies and management strengths fully to bear on their results," Mr. Cojuangco told SMC board members. Mr. Cojuangco said he is pursuing programs which will strengthen San Miguel by sharpening management's focus and positioning the company to seize opportunities in the food, beverage and packaging industries as they arise. These programs include strengthening the company's international beer operations, maximizing asset utilization and embarking on strategic alliances and partnerships across its core business. While these opportunities are being explored, the transaction is expected to improve San Miguel's earnings per share by an estimated P0.60 on an annualized basis. aisadc Nestle Philippines Inc. (NPI) is a joint venture established in 1960 between San Miguel and Nestle S.A. of Switzerland. The Philippine food and beverage company initially owned 60% of the joint venture but over time its stake got diluted to the present level of 45% while Nestle's increased to 55%. Management always resided with Nestle. Documents executed today by San Miguel and Nestle officials provide for the payment to San Miguel of US$591.5 million (P25.6 billion) for its 45% stake in NPI. Nestle will assume San Miguel's P3 billion pro-rate share of NPI's debts. An NPI affiliate will also purchase San Miguel's 60% stake in Rizalag Land Company, Inc. for P2.1 billion. Rizalag holds title to the land on which most of NPI's plants are located. NPI owns the rest of Rizalag's equity. Pending SMC shareholder approval of the transaction and finalization of the transaction documents, SMC and the buyers will put into escrow the shares and cash purchase amounts, respectively. NPI will also put into escrow approximately P600 million representing San Miguel's pro-rata share of NPI's retained earnings as of June 30, 1998. Interest earned by the escrow funds will go to San Miguel upon completion of the transaction in November. cdll In addition, San Miguel will retain ownership of a five-hectare parcel of land valued at about P1.5 billion currently occupied by NPI's Magnolia ice cream plant on Aurora Boulevard in Metro Manila. San Miguel will also retain ownership of the popular Magnolia brand and NPI will continue to pay royalties for use of the brand. The valuation obtained by San Miguel in this transaction is above the average of the various estimates published by several international investment banks in the past ten months. The valuation compares favorably with recent average market valuations of major international food and beverage companies, and reflects San Miguel's assessment of NPI's future revenues, earnings and cash generating capacity. The transaction represents a friendly culmination of a fruitful 38-year partnership between Nestle and San Miguel. Nestle fully supported the move, which was consistent with its own strategy of full ownership of its operations, and Mr. Cojuangco said that Nestle's additional investment in NPI constitutes a vote of confidence in the Philippine economy. aisadc "While our long association with Nestle S.A. has been quite rewarding, we have been a passive partner," Mr. Cojuangco said. "We believe our shareholders want to see us take a more active role in our key companies. Additionally, the regional economic crisis may linger for a while longer and this requires us to maintain a strong financial position that will enable us to effectively weather the adverse business climate and seize new business opportunities as they arise. After this transaction, San Miguel's cash position will be greater than its debt." JP. Morgan acted as financial adviser to San Miguel in the transaction. Founded in 1890, San Miguel is one of the largest listed food and beverage companies in Southeast Asia and is active within the brewing and beverages, food and food-related, and packaging areas. San Miguel's ordinary shares trade on the Philippine Stock Exchange and trade in ADR form in the United States (each equal to ten SMC Class B common shares). Prices for the ADRs may be accessed on the NASD OTC Bulletin Board under the symbol SMGBY. Quotes for San Miguel ordinary shares may be accessed on Bloomberg under the symbol SMC/B PM and on the Reuter Equities 2000 Service under the symbol SMC. August 21, 1998 Philippine Stock Exchange, Inc. Disclosure Department Listings & Disclosure Group 4th Floor, Phil. Stock Exchange Centre PSE Center, Exchange Road Ortigas Center, Pasig City Attention: MR . REYNOLD ONG Vice President Listing & Disclosure Group Gentlemen : Please be advised that at a regular meeting held August 21, 1998, our Board of Directors unanimously approved a resolution amending the Company's By-laws by deleting subparagraphs (a) and (d) of Section 1 of Article V, which require the vote of stockholders owning at least 2/3 at the outstanding capital stock of the Company for the following corporate acts: 1. the sale of all or substantially all of the Company's interest in subsidiaries or affiliates unless the aggregate transaction value of the interest sold does not exceed 10% of the total assets of the Company as reflected in its latest audited financial statements; and 2. Non-allied investments for a purpose other than the primary purposes of the Company. The resolution will be presented to the stockholders for approval and ratification at a special stockholders' meeting to be held on November 12, 1998, at 4:00 in the afternoon, at the EDSA Shangri-La Hotel Ballroom, Mandaluyong City, Metro Manila. The Stock Transfer Books of the Company will be closed from 25 September to 23 October 1998, and the record date shall be 25 September 1998. Very truly yours (SGD.) FRANCIS H. JARDELEZA Senior Vice President-General Counsel and Assistant Corporate Secretary August 21, 1998 Philippine Stock Exchange, Inc. Disclosure Department Listings & Disclosure Group 4th Floor, Phil. Stock Exchange Centre PSE Center, Exchange Road Ortigas Center, Pasig City Attention: Mr . Reynold Ong Vice President Listing & Disclosure Group Gentlemen : Pursuant to resolutions unanimously approved by the Board of Directors of San Miguel Corporation (the "Company") at a regular meeting held on August 21, 1998, the Company and Nestle S.A., today, executed memorandum of agreement for the sale of all the Company's stockholdings in Nestle Philippines, Inc. ("NPI") for a price of about P25.6 Billion. The Company also executed a memorandum of agreement for the sale of all the Company's stockholdings in Rizalag Land Co., Inc. ("Rizalag") for a price of P2.1 Billion. The sale of the Company's shares in NPI and Rizalag will be presented to the stockholders of the Company for approval and ratification at a special stockholders' meeting to be held on November 12, 1998 at 4:00 in the afternoon, at the EDSA Shangri-La Hotel Ballroom, Mandaluyong City, Metro Manila. The Stock transfer Books of the Company will be closed from September 25 to October 23, 1998 and record date shall be September 25, 1998. cdll Very truly yours, (SGD.) FRANCIS H. JARDELEZA Senior Vice President-General Counsel and Assistant Corporate Secretary