The most diversified conglomerate in the country is set to exit the management of legacy carrier Philippine Airlines (PAL) next month, pending the completion of requisite steps to execute taipan Lucio C. Tan’s bid to take over the airline.
Although the Tan family’s $1-billion venture to buy back its shares in the airline from San Miguel Corp. (SMC) has been sealed, the deal is not yet executory, a source familiar to the matter said. The insider explained that there are still certain procedural requirements that need to be met before the agreement can be put to a close.
“The deal is final, but not yet executory. There are still requisite steps to be undertaken, like the disclosure before the Securities and Exchange Commission [SEC] of both parties, and their official announcement to their stakeholders,” the source said in a phone interview.
The insider said the deal will most likely be executed by October, as reflected on the timeline that the source obtained.
The management, the source said, will remain the same until the closing conditions have been met. This means that Ramon S. Ang will continue to sit as the airline’s president and COO, despite the entry of PAL’s new general manager, Jaime J. Bautista.
The new general manager, who will oversee the day-to-day operations of the flag carrier, previously served as the airline’s president before the foray of the food-to-infrastructure firm into PAL.
Another source earlier said the two groups have already secured the payment for the buyback, thus allowing the country’s second wealthiest man to fully own Trustmark Holdings Corp., which has an 89.78-percent equity in PAL Holdings Inc., the operator of the flag carrier.
Before the transaction, San Miguel Equity Investments Inc., a unit of the food-to-infrastructure firm, held a 49-percent shareholding in Trustmark, while the controlling stake was held by the Tan family.
To recall, the conglomerate led by Ang acquired a minority stake in the Tan family’s airline in 2012 for $500 million. Since then, the firm has been pumping in
money to modernize the fleet of the legacy carrier.
Before the deal’s announcement, Tan expressed his willingness to sell his equity in the flag carrier, prompting the SMC Group to look for potential partners to lift the airline up from its plummeting bottom line.
But talks sprouted early this quarter about a potential buyback transaction by the Tan family. Sources said Tan wanted to take full control of PAL once again due to issues on lost family privileges, early retirement benefits and fuel-supply agreements with Petron Corp.
Tan was said to have secured funding from major banks in the country, including BDO Unibank Inc., China Banking Corp., Philippine National Bank and Asia United Bank, to acquire the stake of the SMC unit.
PAL Holdings successfully dished out an income backflip, after it
posted a net profit of P1.49 billion in the second quarter of 2014 from a net loss of P1.08 billion in the same three-month period in 2013.
In the same comparative periods, revenues of the airline operator rose by 47.4 percent to P27.30 billion from P18.52 billion, while operating expenses climbed by a slower P31 percent to P6.04 billion from P19.47 billion.
The firm attributed the growth in earnings last quarter to the favorable passenger revenue performance during the said period, driven mainly by the introduction of new routes, such as London, Abu Dhabi, Damman, Riyadh, Canton and Haneda in Japan.
As of end-June its fleet is composed of 85 aircraft, composed of six Boeing 777-300ER, four Boeing 747-400, five Bombardier DHC 8-400, four Bombardier DHC 8-300, 10 Airbus A340-300, 18 Airbus A330-300, seven A321-231, 28 Airbus A320-200 and three Airbus A319-100.