Taipan Lucio Tan is consolidating the operations of Philippine Airlines under listed PAL Holdings Inc., announcing Friday a share swap transaction with related companies valued at over P8 billion.
The shareholder streamlining comes as the group seeks to turn Philippine Airlines into a five-star carrier, an upgrade from its current three-star status, apart from cutting expenses and increasing earnings.
A more simplified ownership structure would also make it easier for PAL Holdings to eventually take on a strategic investor—a scenario the flag carrier’s management said was always in the cards.
For this transaction, PAL Holdings will acquire 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.
Once done, Philippine Airlines and Air Philippines would be controlled by PAL Holdings, which said the move would lead to “enhancing the transportation experience of the riding public, reducing costs and increasing revenue.”
Attracting investors
“The exercise is intended to address the highly competitive nature of the industry since the integration of both businesses into a single organizational structure would make PAL a more viable investment for interested investors and enable the same to access funds to expand the business,” PAL Holdings said.
As noted, the deal will take the form of a share swap with related entities called Cosmic and Horizon, which own 60 percent and 40 percent of Zuma, respectively.
PAL Holdings will issue both companies 1.65 billion shares out of its unissued capital stock, priced at P5 per share, or a total of P8.24 billion. Unicapital Inc. was tapped to assist in the share exchange ratio.
Approvals were still needed from the Securities and Exchange Commission, as well as the Philippine Competition Commission (PCC), since the deal value exceeded the P1 billion threshold set by the
antitrust body.
As such, PAL said no definitive timetable could be disclosed.
Profit down
PAL Holdings, which has a market value of P124.18 billion, announced last month that nine-month profit this year fell 57 percent to P2.55 billion.
It said revenues were slightly higher at P85.35 billion, or up 3.5 percent. Most of these came from passenger revenues, which rose 4.7 percent to P71.47 billion. Cargo revenues, on the other hand, dropped to P4.94 billion from P5.46 billion in the same nine-month period for 2015.
PAL Holdings added revenues during the period were mainly propped up by the weaker Philippine peso against the US dollar.