Source: Reuters Author: Kirby Chien 12/12/2007
Subject Concerned: Airlines
Singapore Airlines does not plan to raise its US$918 million bid for a 24 percent stake in China Eastern Airlines, it said on Dec. 12, despite speculation that the bid is too low and could attract rival offers.
Singapore Air and parent Temasek had agreed in September to buy the stake to gain access to China's fast-growing and lucrative air network, and China Eastern shareholders will vote on the bid at an extraordinary general meeting on Jan. 8.
"Our price ceiling is on the table," said Chew Choon Seng, chief executive of Singapore Airlines, the world's second largest carrier by market value. "It is up to the shareholders of China Eastern to decide."
While the price Singapore Air offered was a premium to China Eastern's share price at the time the deal was signed, the mainland carrier's shares have since doubled, leading to grumbling about the offer price.
"Some people think the price is too low," said Li Jiaxiang, the president of Air China whose parent owns just over 11 percent of China Eastern.
Air China, the country's largest airline, and Cathay Pacific have said they were also interested in buying into China Eastern.
"We are gathering all the relevant information, and will make a decision based on what benefits a Singapore Air stake in China Eastern will bring to small shareholders," said Li, talking about the chances of Air China voting against the deal.
The airline executives were in Beijing for the signing of an agreement for Air China and Shanghai Airlines to join the Star Alliance network.
Singapore Air said it was a long-term strategic investor that would bring value to China Eastern and help make it more competitive.
"There must be competition domestically to improve the industry," said Chew. "If you cannot compete effectively domestically, how is an airline going to compete globally."
The management team loss-making China Eastern is considered by some analysts to be a weak link in the domestic aviation industry, while Singapore Air is widely regarded as one of the world's best run carriers.