Manila—A group led by San Miguel Corp. president Ramon S. Ang has entered serious discussions to take over control of flag carrier Philippine Airlines from the group of tycoon Lucio Tan.
Industry sources said Ang’s group and the Tan family had a “meeting of minds” for Ang’s group to invest in Southeast Asia’s oldest airline and were in the thick of discussions before Christmas.
Other sources said the Tan group’s asking price for the airline was $1 billion in consideration of a controlling equity and part of refleeting costs but the value of a potential deal with Ang’s group was not known. But another source familiar with the matter said Ang’s group had presented a very good offer that has led to an “agreement in principle.”
The sources said some preliminary paperwork had been drawn up as of Friday in the presence of Harry Tan, the tycoon’s brother. But the sources added that a final agreement would depend on the outcome of a due diligence audit on the airline.
It was not known, as of press time, whether the potential buy-in deal would involve Ang in his personal capacity or if San Miguel itself would eventually be part of the transaction. The airline business, however, is in line with the conglomerate’s diversification into infrastructure-building.
San Miguel is investing about $300 million to modernize and set up new tourism amenities at the Godofredo P. Ramos airport in Caticlan, the main gateway to the popular Boracay Island. The conglomerate has also expressed interest in participating in the public bidding for the public-private partnership airport contracts for Palawan, Bohol and Caraga (Agusan).
Ang, himself a pilot, has been in discussions to buy into PAL for the last few years but no progress had been made until recently. His business rival, First Pacific Co. Ltd. executive director Manuel V. Pangilinan, was likewise looking at PAL and 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 eventually went their separate ways.
For its part, PAL earlier got an imprimatur from Malacañang to spin off its catering, ground handling and call-center reservations units, seen as a prelude for the airline to attract a new investor. The spin-off plan is a measure intended to stabilize PAL’s finances due to the lingering effects of the global recession.
When asked about the negotiations, Jaime Bautista, PAL president, said on Monday he was not aware of any deal. He said management was not included in the shareholders’ discussions.
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 operator Cebu Pacific.
It was earlier reported that PAL is expected to end the year in the red due mainly to labor woes and high fuel prices. The strike by PAL Employees’ Association (Palea) in late September, in protest of the company’s plan to retrench 2,600 workers, forced the airline to scale down flights for several weeks. /INQUIRER