PAL gains backdoor listing in stock mart

Baguio Gold Holdings Corp.’s board of directors has approved the acquisition of a combined 81.57-percent interest in Philippine Airlines (PAL) from six companies, virtually resulting in the backdoor listing of the flag carrier on the local bourse.

Both Baguio Gold and PAL, the nation’s biggest airline, are controlled by beer, tobacco and banking magnate Lucio Tan.

Backdoor listing is a technique used by a company intending to get listed on an exchange without going through the tedious initial public offering (IPO) process. This is done when the company acquires and merges with a company already listed on that exchange.

Analysts said this scheme would allow PAL to raise more funds to finance the acquisition of new aircraft as part of efforts to further strengthen its dominant foothold in the airline industry and be at par with other airlines in the region.

"Baguio Gold can help PAL fund its multi-billion peso expansion by raising capital through the stock market," an analyst at a local brokerage house said.

Last month, PAL president Jaime Bautista said the carrier would consider an IPO as early as 2008 if it could sustain its profitability.

In a statement to the Philippine Stock Exchange, Baguio Gold said it is acquiring PAL shares held by Pol Holdings Inc., Cube Factor Holdings Inc., Ascot Holdings Inc., Sierra Holdings & Equities Inc.,

Holdings & Equities Inc., and Maxell Holdings Corp.

These six companies are also controlled by Tan.

Baguio Gold said the assets of these six companies comprise solely shareholdings in PAL, which is not publicly listed.

The proposed deal also covers the assumption by Baguio Gold of the liabilities of the six firms although no amount has yet been given.

In view of this development, the PSE suspended yesterday the trading in shares of Baguio Gold following the company’s announcement of the board’s decision to take over PAL.

Shares of Baguio Gold on Thursday closed at P2.70 or five centavos lower than Wednesday’s close of P2.75.

Baguio Gold trimmed its net loss in the second quarter this year to P312,501 from the previous level’s P8.64 million. Revenues, however, fell to P627,466 from P679,512.

PAL, on the other hand, earned $28.7 million in its fiscal year ending March this year, its second year of profit.

The airline, which was placed under receivership in 1999 owing to tight liquidity problem, has cut the size of its debt to about $1.1 billion.

It has been adding more flights and upgrading its fleet in view of the highly competitive business environment.

Tan bought into the airline in 1992, when he supported a group led by Antonio "Tonyboy" Cojuangco, then president of Philippine Long Distance Telephone Co. which acquired two-thirds of PAL from the government for $390 million.

Eight years later, Tan acquired inactive mining firm Baguio Gold.

This followed Tan’s acquisition of another listed company, Asian Pacific Equity Corp., which he later renamed Tanduay Holdings.