Cebu Air to purchase Tigerair Philippines stake for S$8.9m

Deal seen as an "overall positive".

Tiger Airways Holdings (TR) has entered into a binding offer letter to sell its entire 40% stake in Southeast Asian Airlines (SEAir), which has been operated as Tigerair Philippines (TRP), to Cebu Air for a consideration of US$7m (~S$8.9m) -- a deal which OCBC views positively.

"The estimated loss is roughly equivalent to less than two quarter’s losses from TRP’s operations, and we view the sale as an overall positive for TR," said OCBC.

The research firm explained that the proposed sale is conditional upon the sale by the other shareholders of SEAir of their stakes to Cebu Air. Based on the unaudited financial results for the six-month period from 1 Apr 2013 to 30 Sep 2013, the book value of TR’s investment in SEAir as at 30 Sep 2013 is nil.

The excess of the consideration over the book value of SEAir is US$7m. Assuming that the proposed sale had completed on 30 Sep 2013, the estimated net loss arising from the proposed sale is S$13.5m, subject to any other accounting adjustments which may be necessary. The estimated net loss is derived by deducting the consideration of S$8.9m and the translation gain of S$2.0m from the amount required to settle the SEAir liabilities, forward sales and transaction cost aggregating S$24.4m.