Business Activities News
- Airline shares suspended after sale reports
Date: 23-May-2007 Sources: (Shenzhen Daily)
SHARES in China Eastern Airlines Corp. Ltd. and Singapore Airlines were suspended yesterday amid reports the world's most valuable passenger airline would soon buy up to a quarter of the loss-making, Shanghai-based carrier for nearly US$1 billion.
A deal would bolster access to booming eastern China for Singapore Airlines, and beef up China Eastern's balance sheet to help it compete with rivals such as a newly forged alliance between Beijing-based Air China and Hong Kong's Cathay Pacific Airways.
A deal would satisfy the dual objectives of giving Singapore Airlines a 25 percent stake, while maintaining Chinese State control at more than 50 percent, Merrill Lynch said Monday.
China Eastern (CEA), the smallest of the country's three main carriers, would sell 2.05 billion Hong Kong-traded shares to Singapore Airlines, while the State would buy 1.3 billion new A shares, the influential Beijing-based Caijing magazine reported earlier this month.
The Shanghai Securities News cited CEA chairman Li Fenghua as saying Monday that China Eastern intended to sell up to a quarter of the airline to a foreign strategic investor.
Both companies declined to comment. Singapore Airlines said it would make a statement after the market close.
Based on the stock's last close, Singapore Airlines would have to pay more than HK$7.65 billion (US$980 million) for the CEA stake.
China Eastern posted a loss of 2.78 billion yuan (US$363.3 million) in 2006. Rivals Air China and China Southern Airlines are both profitable.
Analysts and Chinese State media said a deal was far from certain. Negotiations to secure equity investment from Singapore Airlines were going smoothly, but a deal would depend on regulatory support, CEA's was quoted as saying.
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