Baguio Gold takeover of PAL to cost P136M

Baguio Gold Holdings Corp. said it will pay P136 million for the acquisition of an 81.57 percent interest in flag carrier Philippine Airlines.

In a disclosure to the Philippine Stock Exchange, Baguio Gold said it is acquiring the shareholdings of Pol Holdings Inc., Cube Factor Holdings Inc., Ascot Holdings Inc, Sierra Holdings and Equities Inc., Network Holdings & Equities Inc. and Maxell Holdings Corp. in PAL.

Baguio Gold said the payment will be made over a 12-month period. Both Baguio Gold and PAL are controlled by Filipino-Chinese tycoon Lucio Tan. The purchase price took into consideration the current book values of each of the companies, which are all negative, Baguio Gold said.

"The acquisition of the holding companies is not expected to impact negatively on the minority stockholders of the corporation. "In fact, (the) minority stockholders will benefit from the value added by the indirect investment in PAL without any additional investment on their part," Baguio Gold said.

Baguio Gold will hold a shareholders’ meeting on Sept. 29 to seek approval for the increase in its authorized capital stock to P20 billion from P400 million to accommodate its acquisition of a controlling stake in PAL.

To support the increase in its capital, Baguio Gold said it would convert certain debt acquired in connection with the acquisition of indirect interests in PAL into equity. It did not disclose the amount. The transaction is expected to result in the backdoor listing of PAL on the local bourse.

Backdoor listing is a technique used by a corporation to get listed on the stock exchange whereby the company acquires and merges with a company already listed. 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 agreed to a debt rehabilitation program with creditors in 1999, 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.