S’pore Air, China Eastern Say Acquisition Deal Is Fair
China Eastern and Singapore Airlines on Wednesday rejected rival Air China’s parent’s view that the Singapore flag carrier’s USD$920 million acquisition of a China Eastern stake was unfair to investors.
China National Aviation Corporation, parent to the world’s biggest airline by stock market value and a big China Eastern shareholder, had on Tuesday urged a return to the negotiating table to work out a higher price.
Shares in China Eastern climbed 4.4 percent on Wednesday on investor hopes of a better offer, ending the morning up 2 percent.
Responding to CNAC, Singapore Air on Wednesday called its offer to buy 24 percent of China Eastern — alongside Singapore’s government investment arm Temasek — more than fairly priced in a deal that needed no tweaking.
A senior China Eastern executive said that the deal was focused on the longer term but warned that its share price would plummet should Air China’s parent succeed in getting shareholders to vote down the deal.
Stockholders, including CNAC with more than 12 percent of China Eastern’s Hong Kong shares, are due to vote on the deal on January 8.
“The price is fair and mutually agreed between all the parties. It is the maximum justified on the business fundamentals,” Singapore Airlines spokesman Stephen Forshaw said.
“Singapore Airlines is a long-term partner, not a short-term financial trader, and this transaction will be the start of an important strategic relationship, which will strengthen China Eastern’s competitive position.”
Analysts say Air China, which completed a two-way investment with Singapore Airlines rival Cathay Pacific last year, feared formidable competition from a global player that has long coveted greater access to the booming Chinese travel arena.
CNAC’s strongly worded comments came days after news emerged that Air China Chairman Li Jiaxiang had been appointed head of the country’s civil aviation regulator, which analysts say would bolster Air China’s objections to the deal.
Indeed, CNAC and Cathay had themselves pondered buying into China Eastern months ago, but then announced in September it would abandon that effort for at least three months.
“Air China’s own international business is bleeding losses. They can’t help us,” argued China Eastern accounting department general manager Wu Longxue, who had joined his company’s global investor roadshow over past months, to plug the deal.
“It’s different with Singapore Air: We’re getting their management expertise, operating experience and brand.”
(Reuters)
Source : Reuters - 02 Jan 2008
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