Cebu Pacific Air (CEB) and SIA Engineering are unwinding their partnership in both their joint venture MRO companies based in the Philippines.
These are Aviation Partnership (Philippines) Corporation (APPC), 51% owned by SIAEC and 49% by CEB, and SIA Engineering Philippines Corporation (SIAEP), 65% owned by SIAEC and 35% by CEB, established in 2005 and 2008, respectively.
APPC is based in Manila and provides line maintenance, light aircraft checks, technical ramp handling and other MRO services, at Manila, Cebu, Davao, and Clark, as well as other secondary airports in the Philippines.
Clark-based SIAEP provides airframe maintenance, repair, de-lease checks, cabin retrofits and overhaul services for Boeing 737, Airbus A320 and A330 aircraft, as well as line maintenance at Clark.
CEB is acquiring SIAEC’s entire 51% stake in APPC for a cash consideration of nearly $5.61 million.
SIAEC is acquiring CEB’s 35% stake in SIAEP for $7.74 million cash and states that this will be accounted for as an equity transaction.
CEB and SIAEC signed on 26 October a share sale and purchase agreement for each entity. When completed, each joint venture company will become a wholly owned subsidiary of the acquiring partner while the divesting partner will cease to hold any equity interest.
The valuation for each transaction was arrived at after arm’s length negotiations on a willing-buyer, willing-seller basis, taking into account the net asset value and financial performance of each joint venture, among other factors.
SIAEC states in a disclosure to the Singapore Exchange that based on each entity’s unaudited financial statements for the financial year ended 31 March, 51% of APPC’s net asset value was equivalent to $4.76 million and 35% of SIAEP’s net asset value was $9.32 million.
According to CEB’s disclosures to the Philippine Stock Exchange, its financial statements for the quarter ended 30 June put its net carrying value of a 35% stake in SIAEP at $7.5 million while 51% of APPC’s net asset value works out to $4.5 million.
CEB says that acquiring APPC is in line with its overall strategy to align line maintenance operations with its network and service requirements more closely, “for significant operational efficiencies and optimisation of resources for an even stronger competitive advantage.”
SIAEC says that the SIAEP acquisition fits its strategy to strengthen core competencies and enhance the entity’s status as the group’s centre of excellence for narrowbody aircraft MRO offerings.
It states: “The SIAEC Group is now in a stronger position to seize new opportunities, and provide customers with cost-competitive and integrated MRO solutions, from airframe to engines and components, for modern aircraft fleets of various sizes and composition.”