Cemco Holdings, Inc. vs. National Life Insurance Company of the Philippines Inc., G.R.

No. 171815 (Aug. 7, 2007)

Facts: Union Cement Corp. (UCC), a publicly listed company, has two principal
stockholdersUnion Cement Holdings Corp. (UCHC), a non-listed company, with
shares amounting to 60.51 percent, and Cemco Holdings Inc. (Cemco) with 17.03
percent. The majority of UCHCs stocks were owned by Bacnotan Consolidated
Industries Inc. (BCI) with 21.31 percent and Atlas Cement Corp. (ACC) with 29.69
percent. Cemco, on the other hand, directly owned 9 percent of UCHC stocks.
BCI and its subsidiary, ACC, sold their 21.31 percent and 29.69 percent shareholdings
in the holding company (UCHC) to Cemco. As a result of the acquisition, Cemcos total
beneficial ownership, direct and indirect, in UCC increased by 36 percent, thereby
resulting into at least 53 percent ownership of the shares of UCC.
A minority stockholder of UCC, the National Life Insurance Co. of the Philippines Inc.,
sought to nullify the sale for failure of Cemco to comply with the mandatory tender offer
rule.
Cemco argued that, based on the plain wording of Section 19.1 of the SRC as
confirmed by the SEC En Banc before the transaction was consummated, the tender
offer rule applied only to a direct acquisition of the shares of the listed company and did
not extend to an indirect acquisition arising from the purchase of the shares of a holding
company of the listed firm.
Issue: Whether the mandatory offer rule under the SRC applies only to direct acquisition
of shares in the public company.

Ruling: The Supreme Court ruled that the mandatory tender offer rule applies to both
direct and indirect acquisition, holding that the legislative intent of Section 19 of the SRC
is to regulate activities relating to the acquisition of control of a public company.
Whatever may be the method by which control of the company is obtained, either
through the direct purchase of its stocks or through an indirect means, mandatory
tender offer applies.
The bottom line of the law is to give the shareholders of the public company the
opportunity to decide whether or not to sell their shares in connection with the transfer
of control.
The Cemco case resolves a major issue on tender offers. But there are still issues that
are of interest to the marketinvestors, issuers, investment bankers, lawyers and even
the regulators.