The Market Monitor Minding the Nation's Business
By Riza Lozada
PAL Holdings, Inc. (PHI) will acquire 100 percent of the total issued and outstanding shares of Zuma Holdings Management Inc., the holding firm of PAL and its affiliate Airline Philippines Corp. (APC), in a transaction valued at P8.2 billion to effectively consolidate the airline business of the Lucio Tan Group.
The share swap deal will bind PAL to issue shares from its authorized but unissued capital stock.
The total issued and outstanding capital of Zuma “is currently held by Cosmic Holdings Corp. and Horizon Global Investments Ltd. at 60 percent and 40 percent respectively,” PAL reported to the Philippines Stock Exchange Inc. (PSE).
In exchange for the Zuma shares, PAL shall issue in favor of Cosmic and Horizon a total of 1,647,959,186 shares from out of its authorized but unissued capital stock.
Each share valued at P5 for a total issue value of P8.24 billion. PAL said that no other considerationwill be paid for the Zuma shares.
To determine the exchange ratio for the swap, PHI and PAL Express engaged investment house Unicapital Inc. to evaluate the fair value of the shares of Zuma and PHI.
Based on the valuation report of Unicap, the Board of Directors of PHI and APC resolved to use the values of P5 per PHI share and P95 per Zuma share for the transaction.
PAL, under the deal, will issue 19 shares for each Zuma share held by Cosmic and Horizon.
Consequently, PAL is expected to issue 1.65 billion shares from its authorized but unissued capital stock to acquire the 86.7million Zuma shares currently held by Cosmic and Horizon.
“Both PAL and Zuma benefits from the organization and financial support of the Lucio Tan Group. Their ultimate beneficial owners are the same and have the same directors and officers,” PHI said.
PAL did not provide definite timetable for the share swap deal as of its disclosure on Friday (December 2) and this was due to the regulatory approval required which the company is seeking from the Philippine Competition Commission (PCC) and the Securities and Exchange Commission.
With the integration of the two airlines under PAL, it is expected that the companies can streamline its processes with an end in view of reducing costs and increasing revenue, PAL told the bourse.
PAL said the exercise was intended to address the highly competitive nature of the industry since the integration of both businesses into a single organization would make PAL a more viable prospect for investment.