PAL and the Lucio Tan and John Gokongwei doctrines

Posted at 08/04/14 7:19 PM

Philippine Airlines (PAL) rose 3.8 percent to a 3-month high today, after Inquirer's Biz Buzz said Lucio Tan made a counter-offer. A week ago, Biz Buzz reported Tan wanted to buy out San Miguel from their two-year old partnership. Then Ramon Ang said he hoped the offer of San Mig would be accepted by the end of this quarter. Today's news suggests they're outbidding each other, which could push up the final selling price.

Of course, one of them (or both?) could just be pretending to bid. Someone close to Tan says the tycoon once told him, "When you're buying, appear to be selling. When you're selling, appear to be buying." Then again, there's the adage John Gokongwei would repeat in the 1990s and early 2000s as he got in and out of banking, cement and other businesses: "Everything is for sale at the right price."

And why would the market price go up? I haven't heard anyone say or speculate that either side is buying shares in the market in case control came to a vote. (The way San Miguel and PLDT did over Meralco.) Remember: San Miguel doesn't own 49 percent of PAL, but 49 percent of Lucio Tan's Trustmark, which owns 90 percent of PAL. Unless they break up Trustmark, Tan votes the 90 percent. Whatever San Miguel picks up in the market won't matter, and will make PAL fail the PSE's minimum public ownership rules. And a buy-out at the Trustmark level wouldn't trigger a tender offer at PAL.

One stock trader says some investors (only 159,500 shares were traded today) may be speculating that when the dust settles, the remaining controlling shareholder will be really motivated to speed up PAL's return to profit, so he can make up some of his buying price more quickly. Another trader says with PAL now cleared for new flights to the U.S. and Europe, an undivided management would be able to cut the flying time to a positive bottomline.