Philippine tycoon Lucio Tan mulls sale of Philippine Airlines

Tycoon Lucio Tan may sell his majority stake in Philippine Airlines, the country’s national carrier, after investors approached the company with an offer.

Tan owns a 51% stake in Philippine Airlines and its parent, PAL Holdings, which confirmed on Tuesday that investors had approached the tycoon's group with an interest in buying a 51% stake in both PAL Holdings and Philippine Airlines.

“Lucio Tan’s group is seriously looking into the proposal,” it said in a statement, in response to local media reports about the potential sale, without elaborating.

One report, cited in the statement, said that Ramon Ang’s San Miguel Corp (SMC) has entered into an agreement to buy the stake, but SMC responded with a statement saying that it is “not acquiring the 51% majority interest of the LT Group in Philippine Airlines and PAL Holdings, respectively”.

It simply noted that it was advised by the LT Group that it is in talks with a group of investors who have expressed an interest in buying the majority interest in these companies.

In April last year, San Miguel Equity Investments, a wholly owned subsidiary of SMC, bought a 49% stake in Trustmark Holdings for $500 million, according to PAL Holdings, adding that Trustmark is a majority shareholder of PAL Holdings, which in turn directly and indirectly owned 84.67% of the airline. Trustmark currently holds 99.45% of the holding company.

After the acquisition, the conglomerate took management control of PAL and low-cost carrier PAL Express, with Ang becoming PAL president and chief operating officer, while Tan remained chairman, it says.

Earlier this year, in the wake of the restructuring of the group that was formerly known as Tanduay Holdings, LT Group, a Philippine-listed conglomerate controlled by the family of the tycoon, raised $792 million from a fully marketed follow-on.

Initially, Tan was thinking of injecting his holdings in Philippine Airlines and Air Philippines into the restructured LT Group. However, the impact of oil prices and other external factors make the airline industry quite volatile and the feedback from investors was that they preferred the two airlines not to be included, giving the LT Group a cleaner consumer focus.

For the three months to December last year, PAL Holdings and its subsidiaries booked a net loss of Ps2.2 billion, from a loss of Ps1.2 billion during the same period a year earlier, according to the company’s financial statement.

The latest development also comes as trading in PAL Holdings’ stock has been suspended since the start of the year along with several other companies for failing to meet the deadline for complying with the minimum public ownership level of 10% required by the Philippine stock exchange.

Non-compliant companies had been given a grace period of about two years until December 31 last year. But if they remain non-compliant beyond June 30, they will be delisted from the stock exchange from July 1.

PAL Holdings shareholders approved in March an increase in its authorised capital stock to Ps30 billion, from Ps23 billion, as well as the sale of up to 2.4 billion shares to support the increase in capital.