Tan consolidates hold on PAL

Businessman Lucio Tan is offering to buy out the interests of minority shareholders in flag carrier Philippine Airlines and its listed holding firm PAL Holdings Inc.

The voluntary tender offer deal is meant to give minority stockholders the “same chance” to exit the airline controlled by Tan, who reacquired conglomerate San Miguel Corp.’s 49-percent stake last month, Philippine Airlines general manager Jaime Bautista Friday said.

Bautista said that there was no plan to delist the carrier and take it off the public’s hands.

“We will keep [PAL Holdings] as a listed company, “ he said, adding that they are open to again sell shares in case PAL Holdings’ public ownership level falls below the minimum 10 percent required by the Philippine Stock Exchange.

Lucio Tan. INQUIRER FILE PHOTO

He declined to discuss details of the tender offer price, saying this would be on the “same economic terms” used to acquire SMC’s 49 percent stake. He said the amount would be below PAL Holdings’ current market price, which was up 6.46 percent to P5.77 a share, giving the carrier a market value of P143 billion.

The final details are expected to be published next week, Bautista said.

“We hope to start soon,” Bautista said, referring to the tender offer.

Tan bought back SMC’s minority interest in Philippine Airlines for over $1 billion, giving the taipan control of almost 100 percent of Trustmark Holdings Corp., an entity that owns 89.78 percent of PAL Holdings. The move ended SMC’s two-year stint as stockholder and airline manager.

PAL Holdings, which owns 98.27 percent of Philippine Airlines Inc., has a public float of 10.22 percent, the holders of which are the main target of the planned voluntary tender offer.

The offer will be conducted through Tan-controlled entities Buona Sorte Holdings Inc. and Horizon Global Investments Ltd., according to a disclosure filed with the Philippine Stock Exchange.

The deal was brought on by a Securities and Exchange Commission requirement, given that the buyback of SMC’s stake had effectively breached the 35-percent threshold that would trigger a tender offer.

However, Bautista said, the main purpose of the tender offer was to protect minority stockholders in case of a change of control—which did not apply in this case because Tan never gave up equity control of Trustmark, and its beneficial ownership in PAL Holdings. Tan’s group said their opinion was submitted to the SEC last Sept. 16.

Nevertheless, Bautista said, they would hold a voluntary tender offer, which likely has less requirements than the one mandated by the government.

“If they are not comfortable holding PAL, we can buy their shares,” said Bautista, referring to the minority   shareholders.

Philippine National Bank’s Trust Banking Group is PAL Holdings’ tender offer agent, while PNB Securities is Philippine Airlines’ tender offer agent, a published notice showed.

Tan’s group signaled earlier this month that it would take a more conservative stance in running the airline and could defer aircraft orders from France’s Airbus, which were part of SMC’s refleeting program for the flag carrier.

The carrier, which has seen its market share and margins decline partly due to the entry of aggressive budget carriers, is still aiming to end 2014 with a profit, Bautista said in a previous interview.

PAL Holdings posted a profit in the second quarter, a traditionally busy period for airlines due to the summer months.

It said profit during the period hit P1.46 billion versus a loss of P1.06 billion recorded in the same period last year. PAL Holdings said revenues rose by 47.4 percent to P27.3 billion during the second quarter of 2014.