Singapore Air confident of winning China Eastern shareholders' backing
Singapore Airlines' chief executive said yesterday the company was confident its planned purchase of a stake in China Eastern Airlines would be approved by shareholders without it having to raise the offering price.
Shares in China Eastern closed at HK$7.48 yesterday, almost double the HK$3.80 per share that Singapore Airlines and Temasek Holdings offered for a combined 24 per cent stake in the summer.
The deal is pending approval from China Eastern shareholders, who are due to meet on January 8.
Although China Eastern's stock closed down 4.47 per cent yesterday, it has risen substantially on expectations of a higher bid.
But Singapore Airlines had offered a fair price, said chief executive Chew Choon Seng yesterday in Beijing, where Air China and Shanghai Airlines officially joined Star Alliance, the world's biggest airline alliance.
'We have already put our price ceiling on the table,' Mr Chew said.
'Nothing is a must,' he added, implying that the Singapore carrier would not acquire China Eastern at any cost. 'We have already developed enough connections around the world.'
Mr Chew said the purchase of a stake in China Eastern would not be a speculative investment but a long-term strategy to realise the potential of China Eastern.
He also said that Air China's management - which in September had looked as if it would make a counter bid - had stated publicly that it would vote in favour of a tie-up between Singapore Airlines and China Eastern.
However, Air China, itself, said it had yet to decide.
'We will wait and see what China Eastern tells us on the roadshow,' said Air China chairman Li Jiaxiang. 'There are so many uncertainties in the next 20 days.'
On November 29, Air China's parent, China National Aviation Holding, raised its stake in China Eastern to 12 per cent, fuelling market speculation it would vote against the proposal at the shareholders meeting.
A report from Citigroup on November 26 said Air China's parent would make a counter offer.
The major barrier for Air China to making a counter offer is the balance of power within the central government, said a transportation analyst.
General Administration of Civil Aviation of China minister Yang Yuanyuan said previously that he did not think the mainland should have a single mega-carrier because it would limit competition among domestic carriers. His position appears to make him opposed to an Air China bid, but Li Yongyong, head of the State-owned Assets Supervision and Administration Commission, said acquisitions among airlines should be subject to market forces.
