Conglomerate San Miguel Corp. is bracing for the conclusion of a buyout deal in Philippine Airlines “as soon as possible” while the group of tycoon Lucio Tan stepped up efforts to raise the funds to reclaim full control of the flag carrier.
The buyout deal refers to either a buyback by the Lucio Tan group of SMC’s 49-percent stake in PAL—and the management control that comes with it—or SMC’s purchase of the tycoon’s 51-percent interest in the carrier.
In response to a Philippine Stock Exchange query on news about the prospective breakup of the SMC-Tan alliance in PAL on Monday, SMC confirmed that it was in discussions with the Tan group with respect to their equity stakes in PAL Holdings Inc., Philippine Airlines Inc. and Air Philippines Corp.
“An appropriate disclosure shall be made in the event a definite agreement is concluded by the parties,” the SMC disclosure said, without providing details.
A source privy to the PAL transaction discussed the timeline of what has been described as volatile buyout discussions between the LT Group and SMC since last year. As early as August 2013, the source said that the LT Group had initially signified its interest to sell its 51 percent to SMC (for itself or for a strategic investor).
The first face-to-face meeting took place on Aug. 27 and the discussion ended with the drafting of a share-purchase agreement, which was sent to the LT Group on Sept. 30.
On Oct. 7, however, the source said the LT Group sent a letter authorizing an external counsel with full authority to discuss the transaction and, on Nov. 25, submitted a written offer to buy instead the 49-percent stake held by SMC. The offer was accepted by SMC president Ramon S. Ang the following day on condition that the LT Group would pay SMC all the advances made for PAL’s refleeting.
In April this year, the source said the LT Group offered to sell its 51 percent to RSA through investment bank UBS and a full agreement on the term sheet was made with the final draft submitted to the LT Group only last July 4, with the deal-signing being planned in the following week.