Source: The Standard Author: Stephanie Tong 12/12/2007
Subject Concerned: Opinion Airlines
On December 11, China Eastern Airlines, the mainland's third-largest carrier, launched a roadshow to persuade shareholders to approve a share placement to Singapore Airlines and Temasek Holdings at an extraordinary general meeting on January 8.
According to Shanghai Securities News, mainland stockholders have complained that the shares being sold to SIA and Temasek are underpriced.
A fund manager of one of the top 10 A-share shareholders of China Eastern recently complained China Eastern was selling the shares "too cheaply."
According to an agreement signed on November 9, SIA and Temasek, an investment arm of the Singapore Government, will subscribe to about 1.235 billion and 649 million additional shares respectively of China Eastern at HK$3.80 per share - a 1.9 percent premium over the closing price of HK$3.73 on May 21, the last trading day of China Eastern's H shares before suspension. On December 11, A and H shares of China Eastern closed at 19.09 yuan and HK$7.83, much higher than the selling price of HK$3.80.
China National Aviation Corp, the parent of Air China, increased its stake in China Eastern to 12.07 percent from 11.02 percent on November 29.
There has been speculation that the country's largest carrier might want to increase its influence to veto China Eastern's deal with SIA in the coming EGM, creating a chance for it to repurchase China Eastern. However, Air China secretary Huang Bin reiterated that the airline does not plan to acquire China Eastern and its recent stake increase in the domestic rival does not reflect such a move.
"If CNAC really wants to acquire China Eastern, it could have made a new offer now instead of waiting after the EGM. Yet it seems that there are forces hindering CNAC, triggering it to put aside the plan of acquisition. I suspect that it's from the government as it wants to have several major carriers in the country," an analyst from a US-based investment bank said.