CATHAY Pacific will pay $200 million for its 75 per cent stake in local freight carrier Air Hong Kong after a bidding war that went right to the wire. Sources close to the deal said rival bidder China Southern Airlines believed it was the victor until last weekend when its offer was turned down. Stanley Ho's Shun Tak Holdings rejected its $117 million bid for a 49 per cent share of the company in favour of the revised Cathay offer - which doubled from the original price of $100 million - for an 80 per cent shareholding. Until late last weekend China Southern president Yu Yianen was said by reliable sources to have had a ''handshake agreement'' with Mr Ho for the company. The deal was brokered by Linus Cheung, a former Cathay man and now chief executive of Hongkong Telecom, according to Shun Tak director Andrew Tse, who ran the negotiations on behalf of Mr Ho. Gordon Siu, the economic services secretary is believed to have been in contact with Shun Tak over the takeover although he has denied any involvement. ''I had nothing to do with what was purely a commercial transaction. I haven't seen the Cathay chairman for a long time.'' However, he confirmed that he called Mr Ho after the deal was announced to ''wish him good luck''. Mr Tse of Shun Tak said he could not comment on Mr Siu's or any other government involvement in the negotiations, although he confirmed Mr Cheung had been involved prior to his leaving for Hongkong Telecom. It was natural for him to continue that role through to the negotiation's conclusion, he said. As to why Shun Tak sold to Cathay, Mr Tse said: ''In the short term the deal offered us the least chance of a further cash call on the company. Air Hong Kong survived miraculously in 1992 and the last thing we want to see is another price war.'' If the airline had gone to China Southern there was a strong possibility that a price war would have started which would have seen ''cargo handlers lose out in favour of cargo forwarders,'' he said. The bidding process started in late January when Cathay put its $100 million on the table for an 80 per cent stake. China Southern made a similar offer for a 49 per cent stake just before the lunar new year holiday, said sources. Air Hong Kong's value only became apparent once China Southern declared an interest in the airline, said consultant Jim Eckes of Indoswiss Aviation. It was the fear of China Southern having a bridgehead into Hong Kong which could be converted into full ownership in 1997 that pushed the price up, he said. The company operates four 747 carriers largely to Europe and Britain, and while small it had become a major source of irritation to Cathay which was losing a large share of its cargo on these routes. Cathay has orders for a number of large freighter carriers which one highly placed source said he expected to be scrapped in favour of the Air Hong Kong fleet. This runs contrary to statements by Swire chairman Peter Sutch, who said on Thursday that the two airlines would continue to be run as independent carriers.