China Eastern Airlines Corp, set to sell a stake to Singapore
Airlines Ltd, rose to its highest in more than three weeks in Hong
Kong after the parent of Air China Ltd sought to renew talks on the
transaction.
China Eastern, the nation's third-largest carrier, gained as
much as 5.2 percent to HK$8.11 (US$1.04) and closed at HK$8.05 in
Hong Kong yesterday. The stock more than quadrupled last year. SIA,
Asia's most profitable carrier, fell one percent to S$17.20
(US$11.95) on the city-state's stock exchange.
China National Aviation Holding Co, the parent of Air China and
owning about 10 percent of China Eastern's minority shareholding,
said on Tuesday the sale price to SIA was inadequate and asked both
companies to renew talks. The comments indicate Air China may come
up with a counter offer, said Jack Xu, an analyst at SinoPac
Securities Co in Shanghai.
"The chances that Air China will come forward with a higher bid
are increasing," said Xu. "If they offer a higher price for China
Eastern, the stock will react positively."
SIA and parent Temasek Holdings Pte are seeking to buy 24
percent of China Eastern to expand into China's growing aviation
market. Under the plan, China Eastern's parent company would also
invest HK$4.2 billion to maintain its majority, Bloomberg News
said.
The HK$7.2 billion deal needs approval from two-thirds of China
Eastern's minority owners when they meet on Tuesday to vote on the
plan.
The proposed price of HK$3.80 per share "does not reflect the
fair value of China Eastern Airlines," China National Aviation said
in a statement on Tuesday.
China National Aviation Chairman Li Jiaxiang, a former air force
general who turned Air China into the world's biggest airline by
market value, aims to build a domestic "super carrier" to compete
with SIA and Japan Airlines Corp.
Air China's parent previously considered making a counter-offer
for a stake in China Eastern, though it scrapped the plan in
September. A tie-up with China Eastern would give Air China a base
in Shanghai, the Chinese mainland's commercial capital, and would
enable it to dominate the world's fastest-growing major air
market.
SIA Chief Executive Officer Chew Choon Seng said on December 12
the company wouldn't raise its offer.
(Shanghai Daily by Clare Cheung and Irene Shen January 3,
2008)