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San Miguel Still In Talks To Buy Stake In Philippine Airlines

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02/28/2012 | 11:07am CEST

-- San Miguel negotiating with PAL shareholder Lucio Tan

-- San Miguel's plan to purchase PAL dovetails with oil firm, airport stake

-- Billionaire Lucio Tan controls PAL through several corporate layers

(Recasts lead, and adds background on San Miguel and PAL from the sixth paragraph.)

By Cris Larano

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San Miguel Corp. (SMC.PH) said Tuesday it remains in talks to buy a substantial stake in Philippine Airlines from the carrier's largest shareholder, but downplayed earlier reports that a deal that values the airline at around US$1 billion had been finalized.

San Miguel, the country's largest food and beverage conglomerate by sales, had made several disclosures to the stock exchange since December regarding its talks with PAL's main shareholder Lucio Tan. San Miguel, which has been diversifying into areas such as mining and oil, initially said in December it was invited by Tan to help the carrier upgrade its aircraft fleet, but in January, it said its talks had progressed to "the contemplated investment by the company in PAL", the country's largest carrier by fleet size.

"We advise that the company is still in talks with Philippines Airlines," San Miguel Chief Finance Officer Ferdinand Constantino told the Philippine Stock Exchange in a disclosure in response to the bourse's questions on newspaper reports that a deal for a substantial stake purchase in the carrier had already been struck.

Local newspapers this week reported that San Miguel has completed due diligence on PAL, and that it has decided to acquire a 49% stake for $500 million. The deal will give San Miguel management control of the airline, the reports added.

The management of PAL has denied involvement in the negotiations, and airline President Jaime Bautista has said any talks that have occurred are between San Miguel and the airline's controlling shareholders led by billionaire Lucio Tan.

San Miguel, manufacturer of the beer of the same name and led by businessman Ramon Ang, started to diversify into heavy industries four years ago, and has since acquired mining, power distribution and generation, oil, infrastructure and telecommunications companies.

A stake in PAL makes sense for San Miguel given its stake Petron Corp. (>> Petron Corporation), the country's largest oil refiner and a big supplier of jet fuel. San Miguel also owns the firm that holds the concession to run Caticlan Airport, the airport in tourism-heavy Boracay Island.

Neither San Miguel nor Tan have disclosed the size of the investment or the stake to be sold or in which company that Tan owns San Miguel will buy into.

PAL is 84.6% owned by listed PAL Holdings Inc. (PAL.PH), which is 97.7% owned Tan's privately-held investment holding company by Trust Mark Holdings Corp.

-By Cris Larano, Dow Jones Newswires; 632-848-5051; cris.larano@dowjones.com

Stocks mentioned in the article : Petron Corporation
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