Biz Buzz: Who’s buying into PAL?

Call it a process of price discovery. Taipan Lucio Tan has put the group’s remaining 51-percent stake in flag carrier Philippine Airlines on the block but its strategic partner, San Miguel Corp., is not ready to declare that it is buying this stake. However, SMC, at the end of the day, has the right of first refusal on this block, given its shareholders’ agreement with the LT group. If it does not like the new investor, it can match the offer.

SMC president Ramon S. Ang (a.k.a. RSA) said that PAL’s majority owner wanted to get the best deal and was in talks with two prospective buyers. “Kung friendly ang bibili (if the new investor is friendly) and strategically a good partner, we can live with that,” Ang said. For instance, if the new investor were a foreign airline with a strong brand, then SMC could partner with this airline. Under such a scenario, RSA said he could not say whether SMC would retail management control of PAL.

But is SMC keen on exercising its right of first refusal? “We don’t know yet because we haven’t seen the price,” RSA said. If the price is reasonable, he said SMC would indeed be ready to match it. He said all the discussions were “friendly” and that SMC continued to maintain good relations with the LT Group. “There’s no disagreement. I think they just received a good offer and they are evaluating it,” he said.

Ang said that after achieving labor peace in PAL, improving service and network expansion, aircraft refleeting is on its way, with 22 new aircraft arriving starting August until the end of the year and another 25 units arriving next year. “PAL will be operating the youngest fleet in the region,” he said.

Meanwhile, SMC chair Eduardo “Danding” Cojuangco Jr., replying to a query from a stockholder on Tuesday, said that PAL Holdings would not be delisted from the Philippine Stock Exchange. Asked to elaborate on this, RSA said the LT Group was working on a deal for the holding firm to undertake a private placement of some shares to increase the company’s public float and avoid being stricken off the PSE’s roster.—Doris C. Dumlao

Trouble at Medical City

The Medical City is serious about helping people get well at its 800-bed hospital along Ortigas Avenue, one of the country’s largest and most respected healthcare facilities.

All is not well, however, at the hospital’s boardroom, with some existing stakeholder doctors and practitioners now questioning the board’s intention to issue 575,00 new shares to finance certain expansion plans.

It’s not the issuance itself that worries these stockholders, but what they claimed as the “dubious and disadvantageous” price: The board agreed to sell the shares at P5,000 each, below the P7,500 book value, according to our sources.

A stockholders’ meeting has been set for Wednesday to ratify this decision.

But with mounting dissent over the share price, that meeting might not go as smoothly as the board would expect. Hopefully, the issue gets settled amicably. If not, Medical City has a 24-hour emergency department that should be more than sufficient to calm those frayed nerves.—Miguel R. Camus

CMIC vacuum

As the Philippine Stock Exchange moves to restructure its capital market surveillance arm partly due to cost consideration, we heard that Antonio Garcia, the incumbent president of Capital Market Integrity Corp. (CMIC), has declined an offer to head the new entity within the PSE that is envisioned to take over CMIC’s functions. Our sources said that while the proposed new unit would be mandated to report directly to the Securities and Exchange Commission, Garcia appeared unconvinced that CMIC could preserve its “independence” under the new structure.

But speaking of cost considerations, we heard that one complication was that Garcia has a year remaining in his existing three-year management contract. This means that the abolition of the existing CMIC corporate structure as a self-regulatory organization (SRO) and return to the old system of having a “division” within PSE will trigger a buyout of the remaining year of service under his chief executive officer contract. So apart from head-hunting for a replacement, the PSE now has to shell out more money to retire Garcia. It would have been easier if Garcia were willing to stay on to finish his term under a revised arrangement, but this seemed implausible given tales of “differences” between some prime movers of the PSE and the Garcia-led subsidiary CMIC.

And as it is difficult to explain why the restructuring will not be a step back for the demutualized local exchange, which will soon expand its product suite with the acquisition of a fixed income trading platform, the buzz is that the PSE may not have entirely ruled out the option to simply “rehash” CMIC. Either way, there is not likely to be any reinventing of the wheel. It is just a question of changing the tires with a new set or recycling an old set of tires. Whatever the outcome, we can only hope it is for the good of the capital markets.—Doris C. Dumlao

Credit card fraud

Thank God there are only a few six-figure Hermes bags being sold in the Philippines. Because of one such bag sold through a popular online buying site, government operatives were able to put into custody a top-level executive of a giant in the retail industry who is involved in credit-card fraud.

The Hermes bag and other luxury bags with such names as Balenciaga and Prada were bought using credit cards that were not actually used by the rightful owners. Apparently, the syndicate, which badly hit the sister bank of the retail company where the mastermind worked, filches identity details from the credit cards before they get to the credit card owners. Word has it that more than P5 million worth of goods, including these bags, were bought using the credit cards.

The executive is being held by the CIDG and it remains to be seen what fate awaits the executive with an expensive taste in bags.—Tina Arceo-Dumlao

TripAdvisor award

Movenpick Mactan Island Cebu may have been officially launched in the Philippines only in December 2012, but it already got the attention of TripAdvisor, a popular travel website that tourists consult for advice on where to stay and what to do in tourist sites.

Movenpick was awarded a Certificate of Excellence, indicating that it is an ideal place to stay in when one wants to enjoy the thrills and attractions that Mactan, Cebu, has to offer.

Only the top-performing 10 percent of businesses listed on TripAdvisor receive the award.

Movenpick was brought into Cebu to replace the Hilton, which used to manage the resort hotel put up by Cebuano businessman Manny Osmeña of Manny O. Wines fame.—Tina Arceo-Dumlao

Difficult job

You know you’re going to have one hell of a job if you were told you had to referee an area equivalent to 4,000,400 basketball courts. Apparently, that’s what one staffer of the Bureau of Fisheries and Aquatic Resources (BFAR) has to regulate and, if necessary, defend (with the aid of the Coast Guard).

On the sidelines of a nationwide registration program for fisherfolk, BFAR director Asis Perez says that since his agency’s workforce comprises just 1,100 people, one person is in charge of 188,000 hectares of sea area and about six islands. But that’s just the length and breadth of it, not counting the depths that house the corals, taklobo (giant clams) and other marine resources they have to protect against poachers (both locals and foreigners of various nationalities).

And with recent international incidents involving Philippine waters, Asis said BFAR and its parent agency, the Department of Agriculture, are considering reviving the idea of creating a department for fisheries and aquatic resources. “It’s not really a new idea but fortunately for us, Agriculture Secretary Proceso Alcala is supportive because he understands the complexity of our function, that we are not just aquaculturists,” Perez says.

Perez stresses that municipal and commercial fishery, which takes up much of a BFAR agent’s attention, is not just about input-output the way planting and harvesting go in crop farming. “Tuna, for example, is simply harvested. We’re more about stock management, with the added dimension of defense together with the Coast Guard,” Perez says.

The Philippines, being an archipelago, has porous borders and the lack of institutional support BFAR can give agents in its present state puts a huge strain on their forces fighting the evils of illegal fishing practices while they manage coastal resources. Even the P6.7-billion budget that BFAR is seeking in 2014, if approved, will be just enough to sustain ongoing or pipelined programs, with not much provision for adding and equipping personnel, Perez laments.

It’s hard to tell how well the idea of creating yet another department may be received in Malacañang, Perez adds. But, as BFAR agents are already caught between complex responsibilities and a lack of resources, he says making that proposal is worth a try.—Riza T. Olchondra

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