Global vision: China Eastern seals a deal - ResearchInChina
Date:2007-09-04
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SINGAPORE Airlines Ltd and parent Temasek Holdings Pte will pay about US$918 million for a combined 24 percent stake in China Eastern Airlines Corp Ltd (stock code: 600115).
It signals that an international airline alliance is now on the cards for the Shanghai-based carrier.
The long-awaited deal was officially announced and signed yesterday in Shanghai.
China Eastern will place 1.235 billion new Hong Kong-listed shares with Singapore Airlines and 649 million shares with Temasek at HK$3.80 (49 US cents) each. China Eastern Air Holding Co, China Eastern's parent company, will buy 1.1 billion new H shares at the same price.
After the deal, the Singapore carrier will hold a 15.7 percent stake in China Eastern's total shares outstanding, while Temasek will have an 8.3 percent stake. China Eastern's parent will own a 51 percent stake.
"China Eastern sees the benefits of Singapore Airlines' brand and managerial expertise through this deal and hopes that will help improve our own management," said Li Fenghua, chairman of China Eastern Airlines Corp.
The three companies will cooperate in six areas - flights, operations, service, procurement, training and marketing. A limited overlapping between the two carriers' routes will reduce competition and help expand the route network of both companies.
The shares will have a three-year lock-up period but Temasek is allowed to transfer stock to Singapore Airlines during this period.
Stephen Lee, chairman of Singapore Airlines, said the 24-percent stake is "an appropriate level" for his carrier to exert a desired amount of influence on China Eastern.
The Singapore carrier has sent 12 officials to work with its Chinese counterpart in terms of marketing, service and finance.
The two carriers will also talk about the possibility of China Eastern joining a global airline alliance just as its domestic rivals Air China Ltd and Shanghai Airlines Co.
Singapore Airlines itself joined Star Alliance in 2000.
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