Taipan Lucio Tan’s 29-year-old grandson, Lucio Tan III, will assume the role of president of LT Group Inc. a year from now, setting into motion long-anticipated succession plans at the tobacco, banking, liquor and property conglomerate.
The younger Tan has been taking on more responsibilities within the P94 billion publicly listed holding firm and affiliate Philippine Airlines (PAL) after his father, Lucio “Bong” Tan Jr., died in 2019.
The company’s board, following its annual stockholders’ meeting on Wednesday, appointed Tan as LT Group chief operating officer and vice chair, replacing his grandmother, Carmen Tan.
The board also agreed on a “transition period” before the younger Tan could move up as LT Group president at a date “no later” than April 20, 2023.
This means he would replace his uncle—the elder Tan’s son, Michael Tan—who navigated the company through the tumultuous COVID-19 pandemic.
Michael Tan, who is the taipan’s eldest son by his second wife, had led LT Group as president since the company was organized nearly a decade ago. Since then, however, he has been gradually eased out of key positions in the conglomerate where the power base rests with the taipan’s first family.
Over the past year, he said the conglomerate paid out record high cash dividends of P11.7 billion to investors as core businesses, led by tobacco unit PMFTC Inc., remained resilient amid the global public health crisis.
“It was through hard work, cooperation and a strong financial position, built through the years, that your company was successful in averting difficulties in 2021,” Michael Tan said during the stockholders’ meeting. “The opening up of the economy means that the purchasing power of consumers will improve and [this] bodes well for our different businesses. This should mean increased demand for the products of PMFTC, Tanduay and Asia Brewery.”
He added that Philippine National Bank (PNB) would see better margins and a smaller proportion of bad loans while Eton Properties Philippines Inc. would have higher occupancy rates once the fit-outs of new office and retail tenants are completed.
During the one-year transition period, Michael Tan would turn over functions of the president to his nephew, LT Group said in a separate statement on Wednesday. Moreover, the two were expected to “share decision-making for business and operational matters”
Rumors of a management shakeup had spread ahead of LT Group’s meeting and were first reported on the Inquirer’s Biz Buzz column.
Such changes within Tan’s business empire were often swift and made with little explanation to outsiders.
Michael Tan was also among those recently removed from the board of an Eton joint venture company with property giant Ayala Land Inc. Last January, Tan abruptly replaced PAL president Gilbert Santa Maria a month after the flag carrier exited Chapter 11 bankruptcy proceedings in the United States.
Joseph Roxas, president of stock brokerage house Eagle Equities Inc., told the Inquirer a transition phase would be welcomed by investors.
He added that questions over the Tan family’s opaque succession planning process might have contributed to the share price “discount” of LT Group versus its peers and other family conglomerates in the Philippine Stock Exchange Index.
Still, investors in Tan’s companies should be familiar with such risks in the first place, he noted.
“He who [controls] the shares makes the decision. So, other shareholders who don’t like the decision should just sell,” Roxas said. The younger Tan, who joined the board of LT Group in 2019, holds a degree in electrical engineering from Stanford University. He earned a master’s degree in computer science from the same university in 2017.
Another stock market analyst, who requested anonymity, said Lucio Tan III was an “acceptable” choice to lead LT Group because of the experience he earned over the last few years and also due to the fact he had the family’s support.
The statement from LT Group credited the younger Tan with steering Tanduay Distillers, where he is president and chief operating officer, during the pandemic to end with a record high net income of P1.2 billion in 2021.
“It is my honor to be entrusted with this responsibility. I intend to uphold the values that are strongly held by my grandfather, Lucio Tan, and which I likewise hold dear—the values of integrity, hard work, and diligence,” Lucio Tan III said in the statement.
He was also a director of PAL and vice president of PAL Holdings. He also serves as director of PAL Express, PNB, MacroAsia Corp., Lufthansa Technik Philippines, MacroAsia Catering Services, Inc., MacroAsia SATS Inflight Services Corp., MacroAsia Airport Services Corp., MacroAsia Properties Development Corp., Belton Communities Inc., Eton City, and First Homes Inc.
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The article was originally published in Inquirer.NET and written by Miguel R. Camus.