Ang expects completion of PAL buyout in 3rd qtr

Posted at 07/31/14 7:44 AM

MANILA - Diversified conglomerate San Miguel Corp. (SMC) is hopeful that their bid to buy out the Tan group in Philippine Airlines Inc. (PAL) would be completed within the third quarter so as not to derail ongoing improvements in the airline’s financial performance.

SMC and PAL president Ramon S. Ang said in a text message that shareholders of the national flag carrier are looking forward to concluding talks within this quarter.

“I hope so,” Ang replied when asked if they expect the negotiations to be completed within the third quarter.

Early this week, diversified conglomerate SMC said it is in discussions with the Tan Group with respect to their equity stakes in PAL Holdings Inc., Philippine Airlines Inc. and Air Philippines Corp.

Since the entry of SMC, PAL has embarked on a massive fleet renewal program involving the acquisition of 100 brand new aircraft. It placed an order for 64 brand new Airbus aircraft worth $9.5 billion of which 19 have been delivered and deployed.

A source said the Tan Group wants to buy back the shares sold to the SMC Group more than two years ago as the national flag carrier is back in the black and is set to expand its flights to the US with the country’s safety aviation rating raised back to Category 1 from Category 2, and with Europe lifting the ban its July last year.

The source said PAL is set to report a profit of P1.5 billion for the second quarter of the year and this will be the first time in years that the airline would report a net profit.

With this, PAL is looking forward to booking a profit of more than P1 billion this year.

“PAL under Mr. Ang’s management, is confident it will end the year with profits given its current position. It is currently projecting net profits of more than a billion for the year ending December 2014,” the source added.

Astro del Castillo, managing director of First Grade Finance Inc., said the buyout will benefit the two groups, whichever way it goes.

“Definitely, it will benefit shareholders especially the minority because both parties are committed in investing more in the company,” he said.

Del Castillo said the aggressive stance of both groups show their seriousness in PAL, whose books are improving, making it more attractive to new investors.

In April 2012, SMC’s wholly-owned subsidiary San Miguel Equity Investments Inc. acquired a 49-percent equity interest in Trustmark Holdings Corp. for $500 million. Trustmark owns 97.71 percent of the airline’s parent firm PAL Holdings Inc., which in turn owns 84.67 percent of PAL through PR Holdings Inc.

The Tan Group is reportedly collecting funds to buy out the SMC Group, which has management control of PAL. But SMC is also willing to buy out Tans 51-percent stake in Asia’s first airline.

Del Castillo said investors favor the takeover of the diversified conglomerate SMC.

“Investors are more excited because Ang broke the barriers and he secured the new fleet, routes and partners. He is seen as innovative,” del Castillo said.

Since the entry of SMC, PAL has embarked on a massive re-fleeting program aimed at acquiring 100 new aircraft to replace its existing fleet. It expects to save as much as $400 million from fuel and maintenance costs per year as part of its re-fleeting program.