Manila (Philippine Daily Inquirer/ANN) - Philippines' Lucio Tan group of companies is hatching a deal to sell a controlling stake in flag carrier Philippine Airlines to a group led by San Miguel Corp. president Ramon S. Ang.
Industry sources said Ang's group and key representatives from the Tan family had a "meeting of minds" where the former would buy into Asia's oldest airline. The two parties were said to be in the thick of discussions before Christmas.
Another source familiar with the matter said Ang's group had presented a very good offer that was accepted "in principle" by the Tan group, but the value under consideration was not revealed.
Other sources said Tan was willing to let a new investor come in for at least US$1 billion. For that amount, the investor will gain controlling equity while shouldering part of re-fleeting costs.
The sources said some preliminary paperwork had been drawn up last Friday in the presence of Harry Tan, the tycoon's brother. The next step is a due diligence audit to finalise the terms of the acquisition.
The Lucio Tan group's holding firm for the airline business, PAL Holdings Inc., surged by 15.78 per cent to close at 6.97 pesos ($.15) a share at the local stock market Tuesday. This gave the company a market capitalisation of 32.63 billion pesos ($744.4 million).
It is not known whether the potential buy-in deal will involve Ang in his personal capacity, or if San Miguel itself will eventually be part of the transaction. The airline business, however, is in line with the conglomerate's diversification thrust in infrastructure.
San Miguel is investing about $300 million to modernise and set up new tourism amenities at the Godofredo P. Ramos airport in Caticlan, the main gateway to Boracay Island, a top tourist draw.
The conglomerate has also expressed interest in public-private partnership airport contracts for Palawan, Bohol and Caraga (Agusan).
Ang, himself a pilot, has been interested in acquiring PAL over the last few years. His business rival, First Pacific Co. Ltd. executive director Manuel V. Pangilinan, was likewise looking at PAL and was earlier reported to be the front-runner in the race to acquire PAL.
Pangilinan had earlier offered $700 million to take over the airline, industry sources said.
Pangilinan and Ang had also considered joining forces to invest in PAL, but that deal fell through.
Earlier, PAL secured Malaca?ang's approval to spin off its catering, ground handling and call-center reservations units. The move is seen as a prelude for the airline to attract a new investor.
The spin-off plan is meant to stabilise PAL's finances, which took a beating from the recent global financial crisis.
When asked about the deal being hatched, PAL president Jaime Bautista told the Inquirer that, as far as management was concerned, no one was aware of any plan to sell a controlling stake in the flag carrier.
And in any event, management was not included in the shareholders' discussions, Bautista said.
Also, Ang did not comment on the reported deal. But market sources said he was overheard telling associates that the planned acquisition would be "for the good of the country."
Other sources from the Lucio Tan group said the taipan had long set several conditions for the entry of a new investor, including a prohibition for the prospective buyer to sell to another taipan.
Another tycoon, John Gokongwei Jr., controls rival airline Cebu Pacific.
Tan's group likewise sought security of tenure for its roster of young executives.
It was earlier reported that PAL would end the year in the red due to its labor woes and high fuel prices.
The strike by PAL Employees' Association late September forced the airline to scale down flights for several weeks. PAL workers were protesting the company's plan to retrench 2,600 employees.
PAL booked a net loss of $39.4 million in the third quarter-a reversal from the profit of $27.6 million it reported a year ago.
