Source: AFP Author: 12/18/2007
Subject Concerned: Government Opinion Airlines Human Resource
The chairman of China Eastern Airlines is confident that rival Air China and other minority stakeholders will not block a deal with Singapore Airlines (SIA), newspapers reported on Dec. 18.
Chine Eastern chairman Li Fenghua made the comments during a stop in Singapore, local newspapers reported.
"From the meetings I have had with investors so far, I am confident they now understand what is at stake here and will bless the deal," The Straits Times quoted Li as saying.
On Dec. 17, shares in China Eastern Airlines tumbled sharply on worries that minority shareholders may vote down a proposal for Singapore Airlines to take a strategic stake in China's third-largest carrier.
SIA and the Singapore state-linked investment firm Temasek Holdings in November signed a deal to buy 24 percent of struggling China Eastern.
Singapore Airlines, majority-owned by Temasek, will buy 1.235 billion shares for a 15.7 percent stake and Temasek 649 million shares for an 8.3 percent slice at HK$3.80 per share.
Dealers noted that SIA's acquisition price of China Eastern shares is much lower than the mainland carrier's current market price, which had nearly doubled since the offer was made.
But Li told The Business Times that the price of HK$3.80 "was negotiated over a period of time, and was at a huge 35 percent premium to the prevailing price of the share at the time..."
There have been lingering expectations of a rival bid by Hong Kong-based Cathay Pacific and flag carrier Air China. The two abandoned a rival offer in late September, reportedly as a result of pressure from the Chinese authorities.
Li told Singapore newspapers the Chinese government has blessed the SIA-Temasek deal and there is no chance of Air China's blocking it.
"The state policy is to maintain three airlines, competing with each other," The Business Times quoted him as saying.
He added the deal was about more than an injection of capital.
China Eastern's board will increase to 14 seats to include three slots for SIA's top executives and a Temasek director, The Business Times quoted him as saying. At the operational level, SIA will send 10 executives to work in China Eastern, which in turn will send 20 management officials to work with SIA, the report said.
"The significance of the tie-up lies more in the introduction of best practices and improving our product and service levels," The Straits Times quoted him as saying.