Strategic investment pushes issue forecasts past US$800m
Cathay Pacific Airways' agreement to buy 9.9 per cent of Air China is expected to boost the size of the mainland flag carrier's pending share offering by at least 30 per cent.
Air China had planned to raise up to US$600 million, but the target is now likely to be at least $800 million, with one market source even predicting a target of $1.2 billion, although others said that would be difficult to achieve.
'Cathay's strategic investment will definitely help the offering,' a source said. 'This is a very simple and attractive story. China's domestic travel is surging. As a national carrier, Air China is in the best position to capture the growth.
'Teaming up with Cathay will make Air China a much stronger and bigger player that no other domestic rival can compete with.'
Air China is planning to sell 30 per cent of its shares to the public through a Hong Kong-London dual listing, in which 9.9 per cent of the company would be taken up by Cathay. As a result, Merrill Lynch and China International Capital Corp, which are arranging the listing, would need to sell only 20.1 per cent of the carrier to the public.
Backing up Air China's optimism, Cathay chief executive David Turnbull said buying a stake in the national carrier was just a start to gain greater mainland access.