Biz Buzz: Airplane shopping spree

If you’ve been following the airline industry long enough, you’d know that major orders from either Airbus or Boeing are usually announced during international aviation events like the ongoing Farnborough Air Show or the Paris Air Show, which are held on alternate years.

Well, at this year’s Farnborough Air Show, the buzz is all about a large order made by one particular airline that has not been a major presence at these events in recent years—Philippine Airlines.

Indeed, a cursory look at the online chatter by aviation enthusiasts reporting out of England indicates that PAL is on the verge of announcing a major deal to acquire a large number of both wide-body and single-aisle jets. (Remember, San Miguel Corp. president Ramon Ang said that PAL would need as many as 100 new airliners as part of its re-fleeting efforts. Word from Farnborough is that this upcoming deal would be close to that number.)

According to that chatter, the single-aisle aircraft would likely have new generation engines—like the ones being offered by either Boeing or Airbus —which will allow operators to realize cost savings of up to 15 percent per plane (a big thing under today’s pricey fuel regime). On the other hand, the wide-bodied aircraft (the twin-engined variety, we hear), would be used for high-volume regional routes and perhaps even a return to the lucrative Middle East routes.

The big question remains, of course: Will PAL’s new planes be from Boeing or Airbus? Abangan.—Daxim L. Lucas

Smelling the deal

GMA Network chair Felipe Gozon was quick to deny that no deal has been signed for the sale of GMA 7 to the group of businessman Manuel V. Pangilinan. But who reported that such an agreement had been signed in the first place? Definitely not us, as we only reported that the parties were “moving closer” to a deal at an indicative price tag of P52.5 billion for the whole of GMA 7—a number drawn not from thin air but from reliable sources familiar with the impending transaction. A deal is indeed shaping up toward this level but actual deal signing can take more time.

Also, note that MVP has started preparing the funds to close this acquisition, which will be funded by a mix of debt and equity. We gathered that two of the country’s biggest local banks have been brought on board to provide financial muscle to the prospective buyout. “Kaunti na lang” (Just a bit more), is how one source close to MVP describes the state of affairs.

The enterprise value of around P52.5 billion refers to the whole of GMA 7, out of which MVP will get a controlling block. What is still fluid is the exact percentage of sellers joining the block, particularly among the individual members among the three families controlling the network. But what’s clear is that MVP is gunning for close to 80 percent (before the mandatory tender offer) control. Based on equity value estimated from this assumed pricing level, it seems that such a forthcoming deal is already reflected in current market prices. GMA 7 stock prices have risen 53 percent since the start of the year, thanks to the excitement over MVP’s prospective buyout, but prices have firmed up of late below the 52-week high of P11. Needless to say, the market must have smelled the price tag early on.—Doris C. Dumlao

Raising cash

Anyone doubting how serious businessman Manny Pangilinan is in acquiring GMA Network Inc. should set those doubts aside.

The chair of the PLDT group on Tuesday had his ePLDT unit divest one of its most prized liquid assets—its shares in technology firm Philweb—in order to raise cash for his GMA 7 bid. The transaction, worth P4.3 billion, is seen by market watchers as a good move for both parties as ePLDT made about six times its initial investment in the listed firm controlled by former Marcos trade minister Bobby Ongpin. Remember, ePLDT came into Philweb some years ago at P2 a share and then sold at P10.70 apiece.

The Philweb shares were bought back by the cash-rich Ongpin group for a series of payments (the first of which will be settled later this week), and will likely be resold to other business partners who have been clamoring for a piece of the Philweb action for some time now.

For PLDT, they’re now a few billion pesos closer to meeting the P52-billion cash demand of GMA 7’s owners.—Daxim L. Lucas

Call for Cha-Cha

The Foundation for Economic Freedom, a group of economists chaired by former Finance Secretary Roberto de Ocampo, is campaigning for the amendment of the Philippine Constitution to repeal restrictions on foreign investments.

“We believe that these restrictions on foreign investment in the Constitution are now outmoded and deserve to be removed from the Constitution. For example, restricting the foreign ownership of mass media does not make sense in the age of the Internet, when Filipinos can view foreign mass media from their computers and mobile phones,” FEF said in a statement Tuesday.

FEF believes that these constitutional restrictions on foreign investment were only being circumvented through multiple layering, the use of dummies and the use of creative financial and legal instruments.

“We call on President Aquino to convene a Constitutional Convention or Constitutional Assembly at the soonest time possible to amend and modernize the economic provisions of the Constitution,” FEF said.—Doris C. Dumlao

SSS honeymoon ends

The honeymoon is apparently over for SSS president and CEO Emil de Quiros and the militant officers and employees of the state-administered pension fund.

Biz Buzz heard that SSS staffers are up in arms over what they alleged was De Quiros’ high-handed manner of “reforming” the agency. One such reform—according to the disaffected employees—was De Quiros’ decision to cancel their regular rice subsidies (the holy grail of employee benefits in this country).

In fact, the SSS employees’ lamentations against De Quiros were recently made public in lyrical form (whether it is best sung or recited is unclear) on the social networking site Facebook. The SSS employees complained, among others, that their president had little regard for the agency’s staff, was abusive, and carried the airs of someone who felt intellectually superior (this is, of course, a translation of the poem or song that was written in elegant and lyrical Filipino).

The six-stanza poem/song ends with a warning to the SSS chief that he—as a presidential appointee—will, by definition, leave the agency eventually, and that the employees will be around long after his departure.

Of course, De Quiros would be wise to review the track record of his critics among SSS’ officers and employees. This group has protested against practically every single SSS president in recent years, and—worryingly for De Quiros—succeeded in having a number of them ousted.—Daxim L. Lucas

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