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PAL prepares for entry of strategic investor

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PAL prepares for entry of strategic investor

/ 12:18 AM March 01, 2017

The consolidation of taipan Lucio Tan’s Philippine Airlines under listed PAL Holdings Inc.— a key step before a new strategic investor can enter PAL—has been given the go-ahead by the Philippine Competition Commission (PCC).

The main feature of the P8-billion share-swap transaction involved PAL Holdings buying another Tan-controlled company, Zuma Holdings and Management Corp. Zuma owns 99.97 percent of Air Philippines Corp., a company that operates a portion of Philippine Airlines’ flights.

The PCC requires that it be notified of all deals involving P1 billion and above. Since this was an internal shareholder restructuring and that control of the entities would remain with Tan’s group, PAL Holdings said it was informed that the PCC would take no further actions regarding the deal.

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“With the foregoing, the undersigned company will proceed with the share swap transaction,” PAL Holdings said.

As noted, the deal will take the form of a share swap with related entities called Cosmic Holdings Corp. and Horizon Global Investments Inc., which own 60 percent and 40 percent of Zuma, respectively.

PAL Holdings will issue to both companies 1.65 billion shares out of its unissued capital stock, priced at P5 per share, or a total of P8.24 billion.

PAL said the deal was aimed at “enhancing the transportation experience of the riding public, reducing costs and increasing revenue.”

Moreover, it said a single organizational structure “would make PAL a more viable investment for interested investors.”

PAL president Jaime Bautista said last month that they had hoped to seal an agreement with a foreign strategic partner within 2017.

Bautista added they were willing to sell “up to a percentage allowed by law.” For airlines, the limit for a foreign investor was capped at 40 percent.

PAL Holdings saw earnings fall by more than half in the first nine months of 2016, as revenue came in weaker than expected due to lower cargo sales. The company noted that net income from January to September last year hit P2.55 billion, down 57 percent from the same period in 2015.

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Its revenue was 3.5 percent higher at P85.35 billion. —MIGUEL R. CAMUS

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