San Miguel Corp., the Philippines’ largest company, is in talks to buy 49 percent of Philippine Airlines Inc. and take management control of the carrier, according to three people familiar with the discussions.
The airline, controlled by billionaire Lucio Tan, expects to get about $500 million for the stake, said one of the people, who declined to be identified as the discussions are private. Tan’s holdings will drop to about 51 percent as the carrier will issue new shares, the people said.
A purchase would help San Miguel President Ramon Ang reach his goal of doubling sales by 2016 as he diversifies away from food and brewing. Unprofitable Philippine Air cut 2,400 jobs in 2011 after losing market share to budget carrier Cebu Air Inc.
Ang declined to comment about a possible deal in a mobile- phone message yesterday. Joey de Guzman, a Philippine Air spokesman, declined to comment. Tan controls the carrier through companies including Manila-listed PAL Holdings Inc.
“The airline business has the potential for growth in a country that’s now focused on boosting its infrastructure and tourism,” said Jonathan Ravelas, market strategist at Manila- based BDO Unibank Inc. “San Miguel is betting on the view that once the nation’s infrastructure improves, tourism will boom and you start bringing in bigger planes, increase air traffic and even turn PAL into a regional player.”
Asia’s Oldest Carrier
PAL Holdings rose as much as 3.2 percent, the biggest intraday gain since February 13, to 8 pesos before trading up 1.9 percent at 7.90 pesos as of 11:38 a.m. in Manila.
San Miguel, parent of the brewer that controls more than 90 percent of the Philippines’ beer market, said last year it plans to invest more than $4 billion expanding in industries including energy, telecommunications and transportation. In August, the Manila-based company agreed to buy three Malaysian units from Exxon Mobil Corp. for $610 million.
Philippine Airlines, Asia’s oldest carrier, posted a $33.5 million loss in the October-December period. Cebu Air, which flies as Cebu Pacific, has lured customers with a younger fleet and a low-cost, no-frills service. A carrier backed by AirAsia Bhd., the region’s biggest budget airline, may begin flying in the country as early as next month.
PAL Holdings, which owns 82 percent of Philippine Airlines, has jumped 49 percent in Manila trading in the past year. Tan controls 98 percent of the parent company.
Tan, the second-richest man in the Philippines behind Henry Sy, has a family fortune of $2.3 billion, according to Forbes. His other companies include cigarette-maker Fortune Tobacco Corp. and Asia Brewery Inc., the country’s second-biggest brewer.
San Miguel Corp. boosted recurring net income 41 percent in the first nine months of last year to 11.6 billion pesos ($272 million), according to a statement on its website. Earnings were bolstered by sales of higher-margin petrochemicals at refiner Petron Corp. and a 7 percent rise in revenue at its brewery business.