(I've been on vacation so this is another lazy post...a story I wrote for BusinessMirror for its May 9/10 issue.)
SOUTHEAST Asian Airlines (Seair) is reviving talks with international investors following the rejection of a purchase offer by the group of industrialist Alfredo M. Yao. Yao is the founder of Zest-O Corp.
A highly-placed source from the local carrier told BusinessMirror “these talks were stalled when we thought we were already going to have a deal with Yao by June. So we’re just reviving them.”
The source declined to identify the foreign groups only saying that these were “from Singapore and Brunei,” for possible “capital infusion” into the local carrier.
Seair owners headed by co-founders Iren Dornier, Nikos Gitsis and the Filipino group led by marketing guru Tomas B. Lopez Jr., declined the offer by Yao to purchase their shares for $2 million (or P84.63 million). This was $1.75 million (P74 million) lower than the “original consensus price” of $3.75 million (P159 million), before Yao’s group conducted due diligence on the airline.
Yao said he still intends to pursue the purchase of the carrier.
Sources familiar with the matter said the $2-million offered by Yao’s group will only pay for the cost of the brand and takeover of employees. The group does not intend to buy the 10 aircraft Seair is currently leasing from Dornier’s Aviation Enterprise Inc. (AEI) and spare parts. Yao’s group will also not cover the debts of the carrier including the payables on the aircraft leases to AEI. “All of the liabilities of Seair will have to be paid by Gitsis [and company],” the sources added.
In the proposed share purchase agreement, “[Yao’s group] will lease aircraft from AEI on a “power-by-the-hour” basis, the same sources added. This means that Yao’s group will pay only for the actual use of the leased aircraft, even if these are parked in the airline’s hangar. With this commitment to lease AEI’s planes, “it’s like the offer price is still the same as what we had initially discussed,” explained another source from the Yao group.
There is also a non-compete clause in the proposed share purchase agreement between Yao and Seair shareholders. This means that Dornier and Gitsis, who are both pilots and who currently own 40 percent of Seair, cannot put up another carrier to compete with Yao’s airline.
BusinessMirror sources observed that “this clause was not present in the initial agreement between Yao and Asian Spirit’s former owners.” Yao said he intends to merge Asian Spirit and Seair into one airline company.
Yao bought Asian Spirit for about P1 billion but turned over a check amounting to only P700 million because his group was taking over the debts and liabilities of the airline.
In an earlier interview, Gitsis said Seair was “open to all possibilities” in terms of investments either through capital infusion or selling the owners’ shares “lock, stock and barrel.”
“We’re still open to selling [even just the shares owned by the foreign group]. In the long run, the airline needs partners that can help in [our] growth, to keep us up with the growth opportunities that are still open in the market,” he said.
Referring specifically to the negotiations with Yao, Gitsis said: “If the need for capital and aircraft is the main motivator, [we] don’t want to sell out. Our hearts are in the company and we are more than willing to stay, and more than willing to work another 13 years. [Dornier and I] love this country and we no longer consider ourselves foreigners. On the other hand, everything has a price in business.”
He said the airline sees massive potential growth in local tourism “and we can contribute to that in many ways.” But he said he hoped the Civil Aeronautics Board (CAB) would allow the airline to do just that by approving its lease purchase agreement with Tiger Airways.
In January 2007, Seair signed a lease purchase agreement with Tiger Air, the low-cost carrier subsidiary of Singapore Airlines. The deal was for the lease of two Airbus 320s from the regional carrier which would enable Seair to fly to Singapore and Macau, as well as other Asian destinations. Local carriers have opposed the agreement saying the partnership would give fifth-freedom rights to Tiger Air, thereby allowing it to transport passengers to a second country and onwards to a third country.
Due to opposition by local carriers, the CAB has yet to approve the agreement, preventing Seair’s efforts to expand its routes to international destinations using the Clark International Airport as a regional hub.
“Tiger Air gave us a challenge. We thought we could live up to the challenge and we’re still optimistic that we can overcome that challenge,” said Gitsis. He admitted that the regional carrier has also expressed interest in buying into Seair, “but we [foreign shareholders] would have to sell out.”
- - - -
P.S. I flew to Caticlan and back to Manila over the weekend via Seair and noticed that the drinks served to passengers were made by Zest-O. Hmmm...
No comments:
Post a Comment