Temasek Holdings, Singapore's state-owned investment company, will join Singapore Airlines to acquire a stake of up to 25 per cent in China Eastern Airlines Corp, according to people familiar with the deal.
Singapore Airlines has set a HK$6 billion limit on its investment in the deal, which would give it a stake of less than 20 per cent, sources said.
Temasek manages a S$129 billion (HK$660.97 billion) portfolio of investments for the Singapore government that includes holdings in Bank of China and China Construction Bank Corp.
Singapore Airlines, 56 per cent owned by Temasek, would be in a position to have an effective strategic control of China Eastern without having to pay significant upfront capital or assuming initial associate losses, Bloomberg reported yesterday, citing a Morgan Stanley report.
China Eastern chairman Li Fenghua was unlikely to announce an agreement in Hong Kong before next week, said a person familiar with the negotiations. 'The transaction is not likely to be finalised this week since several Chinese government administrative departments have yet to approve the deal.'
One threshold for the deal is approval from the State-owned Assets Supervision and Administration Commission of the State Council.
China Eastern Air Holding, the parent of China Eastern, needs a capital injection from the central government to subscribe to new shares in the carrier to maintain its holding above 51 per cent. The capital injection has yet to receive the required approval.