Philippine conglomerate San Miguel is near to completing a deal to buy an indirect stake in the country's flag carrier, Philippine Airlines (PAL), in what would be San Miguel's first foray in the transport business, sources from the two companies said.
San Miguel, which in recent years has been aggressively expanding its business empire away from its traditional food and drinks portfolio, is set to acquire an indirect stake in PAL by buying a stake of about 49 percent in its parent, PAL Holdings, one source said.
A 49 percent stake in PAL Holdings would be worth around PHP21.7 billion pesos (USD$508 million) based on Monday's closing price.
Asked if San Miguel has reached a deal to buy into the airline, company president Ramon Ang said in a text message late on Monday: "Will be meeting them tomorrow to discuss." He did not give further details.
Shares of PAL Holdings hit a record high of 8.3 pesos on Monday and are up 17 percent this year in step with gains in the main stock index.
San Miguel had previously offered to pay USD$500 million for a stake of more than 40 percent in the airline, sources said, adding the company completed its due diligence on the flag carrier in February.
Another source with knowledge of the deal said a 49 percent stake in PAL Holdings would be equivalent to a stake of around 40 percent in the airline, the oldest in Asia.
Tobacco tycoon Lucio Tan owns 85 percent of the airline via his wholly-owned firm, Trust Mark Holdings. The rest is held by employees, other Tan-held companies and the government through a state firm.
Sources earlier said the business group of Manuel Pangilinan, chairman of the Philippines' largest listed firm, PLDT, and chief executive of the telco's parent, Hong Kong's First Pacific, had made a counteroffer to buy into PAL.
But the Tan group had signed an agreement with San Miguel in December in which it agreed to talk exclusively to the owner of the country's oldest brewery.
San Miguel has been expanding into capital-intensive sectors such as infrastructure, power, mining, and telecoms in the last four years as it seeks faster profit growth after dominating the local food and drinks sector for decades.
PAL has suffered from labor problems, tough competition from budget airlines and high fuel prices for years, dimming prospects for the airline which posted a net loss of USD$33.5 million in the three months ending December 31 compared to a net profit of USD$15.1 million a year earlier.
PAL briefly shut in 1998 due to the weight of its debt and labor problems, but reopened after creditors agreed on a restructuring plan. It still carries around USD$900 million in debt, but has significantly reduced the load from more than USD$2 billion at the height of its financial and labor problems.