China Eastern Airlines Corp will sell 24 percent of its stake to Singapore Airlines Ltd and SA's parent company Temasek Holdings Pte by offering additional H-share in Hong Kong, the carrier's official said today in Shanghai.

 

The stakes will come from the 2.985 billion of H-share to be sold, which has been priced at HK$3.80 (48.6 US cents) per share. The combined value will amount to HK$11.34 billion.

 

Singapore Airlines will pay HK$4.7 billion for 1.235 billion shares, or 15.7 percent the company's enlarged stake after the sale is completed, while Temasek will pay HK$2.5 billion for 649 million shares, or 8.3 percent stake.

 

The HK$7.2 billion deal has been long anticipated with trading in the two airlines' shares suspended since late May.

 

"We are determined to ensure the success of our strategic investors," Li Fenghua, Chairman with China Eastern, said at a news conference today.

 

The rest 1.1 billion shares will be purchased by the carrier's parent company China Eastern Air Group.

 

The move will reduce the group's A-share holding of the company from 59.7 percent to 37 percent. But it will add its H-share holding from zero to 14 percent.

 

China Eastern, the country's third-biggest carrier, has suffered from soaring jet fuel prices and intensifying competition in the past two years, with red in its net profits in 2005 and 2006.

 

The tie-up will help both firms' ambitions, analysts said. On the Chinese carrier's side, the deal may work to bolster its bottom line with Singapore Airlines' managerial expertise, reputation and branding strategy.

 

With China's market booming and next year's Olympic Games in Beijing certain to boost demand further, China Eastern offers a fresh start, Singapore Airlines Chief Executive Chew Choon Seng has said.

 

China limits foreign ownership in domestic airlines to less than 50 percent.

 

(Shanghai Daily September 2, 2007)