December 6, 2016

DISCLOSURE DEPARTMENT
THE PHILIPPINE STOCK EXCHANGE, INC.
Philippine Stock Exchange Plaza,
Ayala Triangle, Ayala Avenue,
Makati City
Attention:

MR. JOSE VALERIANO B. ZUO III

OIC - Head, Disclosure Department

RE

PSE DISCLOSURE FORM 5-1 Substantial Acquisitions

Subject of the Disclosure:

SHARE SWAP TRANSACTION FOR THE ACQUISITION OF ZUMA HOLDINGS AND MANAGEMENT
CORPORATION
Background/Description of the Disclosure:
In its meeting held on 28 Nov 2016, the Board of Directors of the Issuer approved the acquisition of 100%
of the outstanding capital stock of Zuma Holdings and Management Corporation (Zuma) through a
share swap arrangement with Cosmic Holdings Corporation (which owns 60% of the outstanding capital
of Zuma and hereafter, Cosmic) and Horizon Global Investments Inc. (which owns the remaining 40% of
the outstanding capital of Zuma and hereafter, Horizon). In exchange for the Zuma shares, the Issuer
offered Cosmic and Horizon new shares from out of its authorized but unissued capital at the rate of 19
shares for every 1 Zuma share held.
DATE OF BOARD APPROVAL:
28 Nov 2016
DATE OF SH APPROVAL:
N/A
OTHER RELEVANT AGENCIES:
The transaction will be submitted to the Philippine Competition Commission in compliance with the
Philippine Competition Act. In addition, the valuation of Issuers shares shall be subject to confirmation
by the Securities and Exchange Commission. Lastly, the transfer of Zuma shares shall require a
Certificate Authorizing Registration from the Bureau of Internal Revenue in relation to the capital gains
tax and documentary stamp charges due on the transaction.
DATE OF APPROVAL OF RELEVANT AGENCY:
TBA

Rationale for the transaction including the benefits which are exxpected to be accrued to the
issuer as a result of the transaction:
The share swap transaction is intended to rationalize the airline businesses of the Lucio Tan Group (i.e.
PAL and PAL Express, also known as Air Philippines) and bring the same under a single parent company
and within a single group of companies.
Description of the transaction including the timetable for implementation and related rugulatory
requirements, if any:
For and in consideration of 100% of the outstanding capital stock of Zuma currently owned by Cosmic
and Horizon, the Issuer shall issue in favor of said Cosmic and Horizon a total of1,647,959,186 shares
from out of its authorized but unissued capital stock at the rate of 19 PHI shares for every 1 Zuma share.
The transaction is an internal restructuring of the airline businesses of the Lucio Tan Group in order to
bring PAL and PAL Express (also known as Air Philippines) within a single group of companies. In
accordance with the Philippine Competition Act, the transaction will be submitted to the Philippine
Competition Commission (PCC) for confirmation that the same does not result in any prohibited activity
or anti-competition event. Currently pending with the Securities and Exchange Commission is an
application by Zuma to reduce its par value from P100 to P1. As soon as the PCC clears the transaction
and the Zuma application with the SEC shall have been approved, the parties shall proceed to execute
the relevant deeds of exchange.
Identities of the parties:
Name

Nature of Business

Cosmic Holdings
Corporation

Holding Company

Horizon Global
Investments, Ltd.

Investment
Company

Nature of any material relationship with the Issuer,

their directors/officers or any of their affiliates
Common Directors namely: Lucio C. Tan, Carmen
K. Tan, Harry C. Tan, Lucio K. Tan Jr. and Michael
G. Tan.
Indirect stockholder through its investment
in Trustmark Holdings Corporation which owns
84% of the Issuer

Terms and conditions of the transaction:

(a) Nature and Amount of Consideration
Zumas outstanding capital stock of 86,734,694 shares are valued at P8,239,795,930.00. In acquiring
the same, Issuer shall issue 19 new shares from out of its authorized but unissued capital stock for every
1 Zuma share surrendered to it, for a total of 1,647,959,186 shares.
(b) Basis upon which the amount of consideration or value of the transaction was determined
The Zuma valuation was based on the Fairness Valuation Report issued by Unicapital, Inc. dated 28
October 2016 which took into consideration financial projections provided by Zuma for a 5 year period
Unicap, the financial advisor , submiited a fairness report that assigned an indicative fair value of PhP
7.997 Billion to PhP8.851 Billion to the Zuma shares . On a per share basis , this translated to a value
of P92.20 to P102.06 . Management decided to use the value PhP 95 per share for the Zuma shares
which is within the mid-range of the recommended indicative values in the Unicap report . Based on

the valuation report of Unicap, the indicative values were derived by averaging the values computed
using the Discounted Cash Flow , EV/EBITDA and P/E multiples methods and applying the multiples
of Comparable Public Companies. A discount of 20% to 30% was also applied to the peer group
multiples to account for the lack of liquidity of the shares and for the difference in size and scope of
operations.

No. of shares to be acquired:

Ratio:

86,734,694 common shares of Zuma

100%

Terms of payment:
Upon execution of the relevant documents, Issuer shall issue a total of 1,647,959,186 shares from out of
its authorized but unissued capital in exchange at an issue price of P5.00 per share in exchange for the
86,734,694 shares of Zuma held by Cosmic and Horizon. The issuance of Issuers shares in favor of
Cosmic and Horizon will await confirmation from the SEC of the valuation used.
Conditions precedent
The Swap Transaction is awaiting the approval by the SEC of the amendment of the par value of Zuma
an application for which which is pending with the SEC. In addition, the Issuer will await feedback from
the Philippine Competition Commission regarding the transaction.
Description of company subject of the transaction
(a) Nature and Business
Zuma, a holding company, owns 99.97% of Air Philippines Corporation which in turn, is engaged in the
air transportation of passengers and cargo.
Discussion of major projects and investments
Zuma is not engaged in any commercial activity apart from holding investments in Air Philippines
Corporation.
(c) List of Subsidiaries and affiliates, with percentage holdings
Air Philippines Corporation

99.97%

(d) Capital Structure

Authorized Capital Stock
Type of Security
Amount
Common
P10,000,000,000.00

Number of shares
100,000,000 shares

Subscribed Shares
Type of Security
Common

Number of shares
86,734,694 shares

Paid Up Capital
Amount
P8,673,469,400.00

Amount
P8,673,469,400.00
Number of shares
86,734,694 shares

Issued Shares
Type of Security
Common

Amount
P8,673,469,400.00

Number of shares
86,734,694 shares

Outstanding Shares
Type of Security
Common

Amount
P8,673,469,400.00

Number of shares
86,734,694 shares

Par Value
Type of Security
Amount
Common
P100.00*
* Pending application with the SEC for reduction of par value to P1.00.
Ownership Structure (including percentage holdings)
Name
Number of shares % ownership
Cosmic Holdings Corporation
52,084,694
60
Horizon Global Investments Ltd. 34,650,000
40
Board of Directors
Name
Lucio C. Tan
Carmen K. Tan
Lucio K. Tan, Jr.
Michael G. Tan
Joseph Chua

(Regular or Independent)
Regular
Regular
Regular
Regular
Regular

Principal Officers
Name
Lucio C. Tan
Michael G. Tan
Ma. Cecilia L. Pesayco
Susan T. Lee

Position
Chairman/President
Treasurer
Corporate Secretary
Chief Financial Officer

Effect(s)/impact on the business, financial condition and operations of the Issuer:

The restructuring will result in the consolidation of financials and results of operations of Zuma (and
indirectly, of PAL Express) at the level of the Issuer. With the integration of the two airlines under the
Issuer, the companies can streamline its processes thereby enhancing the transportation experience of
the riding public, reducing costs and increasing revenue.
Other relevant information:
N/A