San Miguel, Lucio Tan in Talks Over Airline Venture Stake

San Miguel Corp. said it’s in talks with Philippine billionaire Lucio Tan on their airline venture after a newspaper reported Tan plans to regain the companies whose control he ceded in 2012. Shares in Tan’s companies fell.

San Miguel and Tan are in discussions on their stakes in PAL Holdings (PAL) Inc., Philippine Airlines Inc. and Air Philippines Corp., San Miguel and PAL said in separate filings today. Tan may need to raise about $1 billion to buy back the 49 percent stakes in each airline that he sold to San Miguel two years ago for a total of $500 million, the Philippine Daily Inquirer reported, citing people it didn’t identify.

Philippine Air will probably end up under the control of either of its two biggest shareholders, and if Tan is unable to raise the funds to buy back the 49 percent, San Miguel may buy him out, according to the Inquirer.

“Either the Tan group or San Miguel could be buyers,” Jomar Lacson, head of research at Campos Lanuza & Co. in Manila, said of the airline stakes. Tan’s group could raise the money if it really wanted to, so the question isn’t “whether they can but whether they should,” Lacson said.

Michael Tan, president of LT Group Inc., which holds his father Lucio Tan’s interests in banking, tobacco and liquor, didn’t return mobile-phone messages seeking comment.

PAL Holdings fell 1.6 percent to 5.40 pesos at the close of trading in Manila, while LT Group declined 3.4 percent. San Miguel, led by President Ramon Ang, dropped 0.6 percent while the Philippine Stock Exchange Index lost 0.6 percent.

Middle East Partners

“I don’t think Ramon Ang will just let go it go,” Astro del Castillo, managing director at First Grade Finance Inc. in Manila, said of the airline stakes. Ang “could forge alliances with his partners in the Middle East to consolidate control of PAL.”

Philippine Air and Etihad Airways PJSC expanded a code-sharing agreement this month. The Philippine carrier plans to start flying to New York in October, Ang said in June. The airline resumed flights to London in November after it stopped flying to Europe in 1998.

The U.S. Federal Aviation Administration returned the Philippines to the agency’s highest air-safety rating category in April, six years after the Southeast Asian nation was downgraded. Last year, the European Union lifted a three-year-old flight ban on the flag carrier.

Tan, 80, said last year he’s seriously looking into offers made for his 51 percent stake in Philippine Air, signaling he planned to exit his investment after two decades. Tan gained control of the carrier in 1992 when it was privatized. He also owns Fortune Tobacco Corp., a cigarette maker, and Asia Brewery Inc., the country’s second-biggest beermaker.

To contact the reporters on this story: Clarissa Batino in Manila at cbatino@bloomberg.net; Ditas Lopez in Manila at dlopez55@bloomberg.net

To contact the editors responsible for this story: Dave McCombs at dmccombs@bloomberg.net Terje Langeland, Suresh Seshadri

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