China Eastern to pursue stake sale
Airline chief to keep asking for shareholders' nod if January vote rejects Singapore deal
China Eastern Airlines Corp has vowed to keep going back to the board for a vote if its proposed stake sale to Singapore Airlines is blocked by minority shareholders in a board meeting on January 8. It has made no headway in wooing investors so far.
Besides China National Aviation Holding (CNAH), which owns 12.07 per cent of China Eastern's H shares, at least two funds with stakes in the Shanghai-based airline have baulked at the low bid price and threatened to oppose the sale.
'We definitely don't hope this scenario happens in the board meeting because it will hurt the interests of investors and shareholders,' China Eastern chairman Li Fenghua said.
However, the airline would have no choice but to relaunch a road show to sell the deal to shareholders and ask for a new vote, Mr Li said.
'We will keep asking for a vote until the same proposal is approved at the board meeting,' he said at a news conference in Beijing.
China Eastern agreed earlier this year to issue 1.75 billion shares to Singapore Airlines and Temasek Holdings, as well as 1.1 billion shares to its parent company, China Eastern Air Holding, at HK$3.80 per share.
Singapore Airlines and Temasek will hold a combined 24 per cent of China Eastern's shares and send senior managers to Shanghai to help improve the mainland carrier's corporate governance and guide business expansion.
CNAH had proposed to buy the airline with a better offer.
China Eastern's H shares closed yesterday at HK$6.36, down 16 HK cents or 2.58 per cent. Its A shares climbed 2.98 per cent to 18.33 yuan.
The dispute between China Eastern and CNAH, the parent of rival Air China, seemed to be softening on Wednesday after Mr Li paid a visit to CNAH's headquarters. He later issued a statement saying that CNAH 'expressed understanding of and support for the deal'.
But CNAH and Air China denied any agreement had been reached.
'I thought the atmosphere in the meeting was very friendly, but both sides just elaborated their points with no agreement or consensus being reached,' said an Air China official who attended the meeting.
Mr Li admitted yesterday that no guarantee of support from CNAH was achieved by his visit.
He also said his meetings yesterday morning with two equity funds did not yield any results either.
'I think they understand this is a very good opportunity for us, but somehow, as equity funds, they still focus more on short-term returns,' Mr Li said.
Zhao Xuejun, a manager of Jiashi Fund, which owns both Air China and China Eastern's stocks, said yesterday his company would vote against the deal 'because it would hurt the interests of small investors to sell the shares at too low a price'.
Another fund manager said he would also vote against the deal. 'Can I buy shares at almost one-sixth the price you buy? The whole idea is just ridiculous,' said the manager, who preferred not to be named.
Mr Li said the proposed deal was reasonable, considering that China Eastern's share prices in both the A and H categories were low when they started the negotiations two years ago.
He said that besides capital injection, Singapore Airlines would bring urgently needed advance management and marketing expertise, an edge no mainland airline could match.
Mr Li likened the choice of Singapore Airlines to selecting a school for his children. 'I want my kids to attend the best school, receive the best education and make friends with the best people. It's as simple as that.'
Michael Chan, a divisional vice-president of planning for Singapore Airlines, said at the news conference that his company was committed to the partnership but would not raise its bid price.