Reuters: Deals: San Miguel buys into Philippine Airlines

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San Miguel buys into Philippine Airlines Apr 4th 2012, 04:50 By Rosemarie Francisco MANILA | Wed Apr 4, 2012 12:50am EDT MANILA (Reuters) - Conglomerate San Miguel Corp said on Wednesday it will buy minority stakes in flag carrier Philippine Airlines Inc (PAL) and a sister airline, broadening its business reach after its expansion into power, infrastructure, mining and telecoms. The size of the deal was not disclosed, but sources have previously said San Miguel has been seeking to pay about $500 million for a stake of more than 40 percent of PAL, which is facing tough competition from low cost rivals. The deal with tobacco tycoon Lucio Tan's Trustmark Holdings will give San Miguel indirect stakes in both PAL and its low-cost partner firm Air Philippines Corp, also known as Air Phil. The investment would be used to strengthen the operations of PAL, which has previously said it needs to upgrade its fleet and expand operations to stay competitive with budget operators such as Cebu Air Inc (CEB.PS). "The new investment will allow the two airlines to strengthen operations and stay competitive with the implementation of PAL and Air Phil's fleet modernization program," San Miguel and Trust Mark said in a joint statement. "San Miguel welcomes the opportunity to participate in the refleeting and modernization plans of the two airlines." PAL, which has also suffered from rising fuel costs and labor problems, posted a net loss of $33.5 million in the three months ending December 31 compared with a net profit of $15.1 million a year earlier. Under the deal, San Miguel will receive shares from Trustmark Holdings Corp and Zuma Holdings, the holding firms of Philippine Airlines and Air Phil. Shares of PAL's majority stakeholder PAL Holdings Inc (PAL.PS), which is 97 percent owned by Trustmark, fell up to 2.4 percent on Wednesday after hitting a record high the previous day. San Miguel was up 0.8 percent in a flat broader market .PSI. San Miguel has been expanding into capital-intensive sectors in the last four years as it seeks faster profit growth after dominating the local food and drinks sector for decades. It was not clear how San Miguel would fund its entry into the airline sector. The group sought a loan equivalent to $800 million to complete its $577 million acquisition of 65 percent of Esso Malaysia Berhad, and 100 percent of both ExxonMobil Malaysia Sdn Bhd and ExxonMobil Borneo Sdn Bhd last month. (Reporting by Rosemarie Francisco; Editing by Richard Pullin) Link this Share this Digg this Email Reprints

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