Tycoon Lucio Tan will consolidate his airline ventures as he focuses on expanding his flagship PAL Holdings Inc. and increase its appeal to potential buyers.
PAL will acquire another company owned by Tan called Zuma Holdings & Management Corp. through a share-swap agreement, valuing the whole deal at P8.24 billion, the company said in a stock exchange filing Friday. The purchase will consolidate Philippine Airlines Inc. and budget carrier Air Philippines Corp.
“The integration of both businesses into a single organization structure would make PAL a more viable investment for interested investors,” PAL said in the statement. Consolidating the two airlines will also reduce costs and increase revenue, it said.
Philippine Airlines is in talks with potential investors and is seeking one with experience in running carriers so it can help manage its fleet, the carrier’s president Jaime Bautista said in June. The company is also open to private equity funds and other strategic investors.
The reorganization comes as competition intensifies among carriers in Asia Pacific, where a dozen new airlines started operations in the past decade.
“Consolidating the airlines is very positive and will allow PAL to fetch a higher price from potential buyers,” said Victor Felix, an analyst at AB Capital Securities Inc. “Creating synergies for both carriers means that PAL is also intent on ramping up its domestic operations and get a larger piece of the market share.”
Under the deal, PAL will issue to Zuma owners Cosmic Holdings Corp. and Horizon Global Investments Ltd. 19 shares in exchange for one Zuma stock, according to the statement. Trading of PAL shares, which closed 2 percent higher on Thursday, was suspended.
Zuma owns 99.97 percent of Air Philippines Corp., or Airphil Express. Upon approval of the transaction by the regulators, PHI will indirectly own Airphil Express through Zuma as one of its subsidiaries.
The other direct subsidiary is Philippine Airlines.
“The transaction will rationalize and consolidate the airline business of the Lucio Tan Group under PHI,” PAL said.
PHI earlier reported a total total comprehensive income of P2.96 billion in the first nine months of the year, lower by 54.8 percent from the previous year’s P6.55 billion.
Revenues for the period January to September amounted to P85.35 billion, 3.5 percent higher than last year’s same period figure of P82.48 billion.
The airline’s total operating expenses grew 8.9 percent to P76.21 billion.