Source: Bloomberg News Author: Irene Shen 12/04/2007
Subject Concerned: Government Opinion Airlines
China Eastern Airlines Corp., selling a stake to Singapore Airlines Ltd., rose in Hong Kong trading on speculation about a bidding war after the parent of Air China Ltd. increased its holdings in the carrier.
China Eastern rose 3.1 percent to HK$7.73 at the close of trading. China National Aviation Corp., Air China's parent, has raised its stake in the Shanghai-based carrier to 12.07 percent of the Hong Kong-listed stock from 11.8 percent, according to a stock exchange filing on Dec. 3.
China National Aviation and Air China affiliate Cathay Pacific Airways Ltd. earlier this year considered challenging the Singapore deal by making a rival offer for a stake in China Eastern, the nation's third-largest carrier. China Eastern's minority shareholders will vote on the sale of a 24 percent stake to Singapore Air and parent Temasek Holdings Pte on Jan. 8.
"This could evolve into the first hostile takeover between two big Chinese state-owned companies," Ally Ma, an analyst at Citigroup Inc., wrote in a report dated Dec. 3.
Still, there is "uncertainty" about whether this will happen because of "different gestures" from Air China and China Eastern's ultimate parent, the State-owned Assets Supervision and Administration Commission, and the General Administration of Civil Aviation of China (CAAC), Ma added.
Air China said on Sep. 24 that its parent wouldn't bid for a China Eastern stake for at least three months.
China National Aviation purchased 4.3 million of China Eastern's H shares on Nov. 29, giving it a total of 189 million.
Air China, the nation's largest international carrier, rose 4.2 percent to HK$10.40 in Hong Kong and 2.3 percent to 22.87 yuan in Shanghai. China Eastern rose 2 percent to 17.04 yuan on the mainland.
China Eastern spokesman Luo Zhuping didn't return calls to his mobile phone. Air China spokeswoman Rao Xinyu declined to comment.