PAL Board Okays Plan to Sell 95 Million Shares to Employees

Business World

Tuesday, October 29, 1996

By LARINA G. PEREZ, Senior Reporter

The Philippine Airlines (PAL) board of directors has agreed to offer 95 million shares of the airline worth P477 million to its employees now that the ownership squabble among its stockholders has been resolved.

Industry observers see this move as the management's way of meeting the demands of its union for additional compensation.

In a press conference yesterday, Jose Antonio Garcia, PAL President and Chief Operating Officer, said the shares will be made available to employees at P5 per share.

The 95 million unsubscribed shares account for about 4.75% of PAL's total capital stock. The stockholders of the airline agreed to increase its capital stock from one billion shares to two billion in a meeting last September 10.

Sources at PAL told Business World the airline's board of directors approved the offering of the shares to its employees in previous board meetings even before the infighting among its owners intensified.

However, Mr. Garcia said management could not offer the shares while the ownership issue was still unresolved.

WAIVING OF RIGHTS

The 95 million shares will be offered to airline employees after the Bank of the Philippine Islands (BPI) of the Ayala group waived its rights to subscribe to the additional PAL shares.

However, seven stockholders of Cumulus Holdings Corp., also of the Ayala group, have subscribed about 28 million shares of the airline's capital stock.

The stockholders of PAL have agreed that if any of the members of Ayala group waived its preemptive rights to subscribe to additional PAL shares, the government financial institutions (GFIs) with interests in the airline will have the first crack at taking up those shares.

The GFIs are the Development Bank of the Philippines, Philippine National Bank, Armed Forces of the Philippines-Retirement Separation and Benefits System, Land Bank of the Philippines and the Government Service Insurance System.

However, the proposal to offer the shares to the employees came from the government itself. The GFIs earlier agreed to waive their preemptive rights to subscribe to additional PAL shares in favor of the Lucio Tan group. With the government's waiver, Mr. Tan now controls 56.66% of PAL.

But if the employees fail to avail of the offer, Mr. Tan's group will be given the right to subscribe to the additional PAL shares.