ANA Closes Deal With PAL

As Clear As The Rising Sun

28 January 2019

ANA Holdings Inc. and PAL Holdings Inc. will seal an investment deal next week in Tokyo.

The equity investment will initially comprise 9.5 percent stake in Trustmark Holdings of the Lucio Tan Group which owns 97.71% of PAL Holdings and controls 84.67% of Philippine Airlines (PAL) valued at $95 million with options to take up to 40% share of the company and possible management contract in the future tailored in a similar fashion but tweaked investment agreement the company previously agreed with San Miguel Corporation.

PAL Holdings also control Air Philippines Corporation (APC) through Zuma Holdings and Management Corporation which holds 99.97% of PAL Express.

In April 2012, San Miguel Equity Investments Inc. (SMEII), a wholly owned subsidiary of San Miguel Corporation (SMC), acquired 49% equity interest in Trustmark. Trustmark then owns 97.71% of the Company, which in turn beneficially owns 84.67% of Philippine Airlines Inc.

Thereafter, San Miguel Corporation entered talks with ANA in November 2013 for possible investment stake with the airline but the talks did not pushed through after a falling out with the Lucio Tan Group in 2014.

PAL however entered code share agreements with ANA in November 2014, and Lucio Tan group continued negotiations with the Japanese carrier leading to PAL Holding's equity restructuring in 2018 to pave the way for the foreign investment this year. Additional paid-in capital of ₱25.340 billion from its 2017 financial statement was added to its equity to wipe out capital deficit of ₱29.074 billion in the same year.

PAL said the removal of its deficit was part of the company’s intentions to welcome a new strategic investor that will buy “less than 40% of the company.”

According to source, Trustmark will initially sell 10% of its share to ANA Holdings followed by more due diligence of the airline for the acquisition of additional shares up to 40% with management contract.

The Lucio Tan Group through Trustmark Holdings directly owns 84.6% of Philippine Airlines, while 5.4% belongs to the Government of the Philippines and 10% to private investors.

Collectively, the Lucio Tan Group owns 98.91% of PAL, through a direct ownership in 98.56% of PAL’s shares and an indirect ownership in 0.35% of PAL’s shares through an 82.33% direct ownership in PR.

Nikkei Asian Review earlier broke the news based on news leaks scooped by Philippine Daily Inquirer,  and reported ANA Holdings Inc. is considering investment in PAL Holdings.

"There is continuing discussion. Contract has not been signed yet. So there is nothing to disclose." PAL President and Chief Operating Officer Jaime Bautista said Monday.

Corporate insider however disclosed on condition of anonymity that some of its officers are already booked to fly Tokyo next week without elaborating further.

ANA reported last week it is in talks with PAL’s parent company PAL Holdings about making an investment in the Philippine’s flag-carrier, but stated that no concrete decision has been made yet.

Meanwhile, Lucio Tan did not confirm or deny the talks when interviewed by reporters on the sidelines of the Bangko Sentral ng Pilipinas’ annual reception for the banking community last week. PAL Holdings also denied in a disclosure to the Philippine Stock Exchange (PSE) that it has signed agreement with ANA.

PAL Holdings has market capitalization of US$3.11 billion with US$223 million subscribed shares. PAL assets are valued at US$3.2 billion (₱180 billion) while liabilities were reported at US$ 3 billion (₱166 billion) as of December 31, 2017 based on PSE disclosures.