Lucio Tan taking PAL private

MANILA, Philippines - The Lucio Tan Group has offered to buy out the minority shareholders of the listed parent firm of Philippine Airlines Inc. (PAL) after buying back the interest of diversified conglomerate San Miguel Corp. (SMC) in the national flag carrier for $1.3 billion last month.

In a paid advertisement, Tan’s Buona Sorte Holdings Inc. and Horizon Global Investments Ltd. launched a voluntary tender offer that would allow existing minority shareholders of both PAL and listed PAL Holdings Inc. to monetize their investment and divest their shareholdings.

The offer was made to acquire the interest of minority shareholders with an end view of owning 100 percent of Trustmark Holdings Corp. The company owns 89.78 percent of the listed PAL Holdings that controls 98.27 percent of PAL.

Buona Sorte and Horizon Global Investments recently acquired the 49-percent stake of SMC’s San Miguel Equity Investments Inc. (SMEII) in Trustmark Holdings Corp. Buona previously owned 51 percent of Trustmark Holdings before acquiring SMC’s nine-percent stake in Trustmark Holdings.

Former PAL president Jaime Bautista, who is currently acting as the airline’s general manager, signed the voluntary tender offer for Horizon Global Investments and Stewart Lim for Buona Sorte Holdings.

The Tan Group said it was undertaking the voluntary tender offer even if it was not mandated under the law to conduct such offer to minority shareholders of both PAL Holdings and PAL since there was no change in ownership control.

“Our legal counsel advised us that there is no legal requirement for Buona Sorte and Horizon Global Investments to conduct a tender offer for the shares held by the minority shareholders of both PAL Holdings and PAL since their was no change of control in Trustmark,” the companies said in the advertisement.

However, both companies decided to launch the voluntary tender offer to provide existing minority shareholders of both PAL Holdings and PAL to monetize their investment and divest their shareholdings based on the same economic terms and equivalent to the price of the shares of Trustmark Holdings sold by SMC.

“Buona Sorte and Horizon Global Investments have decided to voluntarily offer to accept and acquire all the issued and outstanding common shares held by any minority shareholders of both PAL Holdings and PAL who wish to sell their share,” the companies stated in the offer.

Tan’s Philippine National Bank and PNB Securities Inc. are acting as voluntary tender offer agents.

Last Sept. 15, Tan took back full control of the airline after completing the $1.3 billion to re-acquire the 49 percent interest that SMC bought in PAL in April 2012.

In April 2012, SMC’s wholly-owned subsidiary SMEII acquired a 49 percent equity interest in Trustmark Holdings Corp. for $500 million.

With SMC on board, PAL embarked on a massive fleet renewal program involving the acquisition of 100 brand new aircraft. PAL entered into its first Purchase Agreement with Airbus for firm order of 44 A320 aircraft with options for 20 A321 NEO aircraft for delivery in fiscal years 2014 to 2020. It also signed a second Purchase Agreement is for a firm order of 10 A330-300 and options for another 10 for delivery in fiscal years 2014 to 2016.

However, PAL and Airbus agreed to an amendment last March wherein the number of order of A330-300 aircraft would be reduced to 15 instead of 20. It dropped an option to acquire eight A321 NEO aircraft in the first purchase agreement but agreed to acquire eight A321 NEO. The airline has until 2017 to exercise its right to purchase four A321 NEO aircraft.

As of end-June, PAL has received a total of 17 aircraft from Airbus including 10 A330 and seven A321. The fleet of the PAL Group including PAL Express stood at 85 as of end-June.

With the Tan Group back at the helm, Bautista earlier said PAL is looking at delaying the delivery of Airbus aircraft.