PSE Circular for Brokers No. 2396-99

September 24, 1999 PSE CIRCULAR FOR BROKERS NO. 2396-99 PHILIPPINE STOCK EXCHANGE PSE Centre, Exchange Road Ortigas Center, Pasig City Attention: Jose Luis U . Yulo Jr . President and CEO Gentlemen: .This is with reference to your facsimile message dated 23 September 1999. The information contained in the article you attached to your facsimile letter and other similar articles was not gathered from any official Alsons Cement sources and the conclusions drawn from this are purely speculation. It is normally the policy of the company not to comment on such speculation, but we can assure you that there are no plans for the merger, as suggested by these reports. Please be guided accordingly. Yours sincerely, (SGD.) JONATHAN PATRICK LARA Corporate Information Officer Phinma, Alcem merger to create biggest cement firm The consolidation in the local banking industry has spread to the cement sector as publicly held Alsons Cement Corp. (Alcem) and three cement companies managed and run by Philippines Investment Management Consultants Inc. (Phinma) are contemplating a merger that will create the biggest cement company in the country. Industry sources said Phinma's three companies Davao Union Cement Corp., Bacnotan Cement Corp., and Hi Cement Corp., which are set to merge operations to establish the biggest cement company will boost their stronghold in the local cement industry by taking in Alcem. Sources said Holderbank Financiere, the biggest cement company in Switzerland, will pave the way for the merger, as it controls a major stake in both the Phinma-run cement companies and Alcem. Holderbank owns 45% of Alcem and 40% of Union Cement Corp. The Phinma-run companies earlier announced the consolidation of Hi Cement, Davao Union Cement, and Bacnotan Cement to create a "Union Cement" with resources of P9.4 billion, which will account for one-fourth of the local cement market. hi Cement, which will increase its authorized capital to P10 billion from P4.27 billion, will be the surviving entity. With a further merger with Alcem (resources: P12.4 billion), a new merged entity with combined assets of P21.8 billion will be formed, cornering almost half of the local cement market. The sources pointed out that the merged entity is looking at an ownership structure of 40 percent for Holderbank Financiere and 30 percent each for Alcem and for the Phinma-run companies. Local cement companies are bent on consolidating their operations to cut down on costs at the same time expand their distribution reach. The consolidation is also expected to result in lower cost for the capital intensive industry that led to ballooning liabilities for the cement companies. "The merger of Phinma-managed companies and Alcem as they have a common denominator in Holderbank . . . the merger could possibly lead to the formation of the country's biggest cement company with a string of presence in the region," one source said. As of the first half of the year, the outstanding debt of Hi Cement reached P3.1 billion while that of Davao Union Cement amounted to P3.4 billion and Bacnotan Cement's P1.3 billion. The liabilities, however, do not include the convertible notes issued by the three companies. On the other hand, liabilities of Alcem reached P8.2 billion. cdlex