SMC takes over PAL, buys out LT Group

MANILA, Philippines - Diversified conglomerate San Miguel Corp. (SMC) is set to take over national carrier Philippine Airlines (PAL), just a year since the food-to-infrastructure firm first invested in the airline.

The conglomerate has entered into an agreement to buy the remaining 51 percent stake of PAL currently owned by the LT Group of tycoon Lucio Tan, SMC’s top official said.

In a text message, SMC president and chief operating officer Ramon S. Ang said the company would acquire all remaining shares in PAL.

Ang said the transaction would not be conducted through SMC itself but with other units.

In April, SMC’s wholly-owned subsidiary San Miguel Equity Investments Inc. acquired a 49-percent equity interest in Trustmark Holdings Corp. for $500 million. Trustmark owns 97.71 percent of the airline’s parent firm PAL Holdings, which in turn owns 84.67 percent of PAL through PR Holdings Inc.

Another SMC official said the conglomerate is set to provide more details regarding the acquisition tomorrow.

Despite owning just 49 percent of loss-making PAL, SMC gained management control of Asia’s oldest airline.

Since the entry of SMC, PAL has embarked on a massive refleeting program aimed at acquiring 100 new aircraft to replace its existing fleet. It expects to save as much as $400 million from fuel and maintenance costs yearly as part of its refleeting program.

PAL is in the thick of a $1-billion expansion program as it plans to further widen its global footprint to include the Middle East, Europe and Australia.

In the nine months of its fiscal year ending March 2012, PAL Holdings Inc. trimmed its losses 24 percent to P2.74 billion compared with P3.59 billion a year earlier as total revenues climbed 2.4 percent to P55.68 billion from P54.38 billion on the back of higher revenues from its passenger and cargo businesses.

Ang earlier said that PAL will return to profitability in 2014.

Late last month, LT Group Inc. president Michael G. Tan announced that PAL will no longer be consolidated into the listed holding firm of the liquor and tobacco magnate.

Instead, LT Group will focus on being a consumer-related conglomerate through units Asia Brewery Inc., Tan-duay Distillers Inc., Eton Properties Philippines Inc., Philippine National Bank and tobacco firm PMFTC Inc.