China Eastern shareholders reject SIA bid
The outcome is a blow to Singapore Air’s efforts to gain a foothold in China’s booming air travel market.
By Agencies |
BEIJING: Shareholders in China’s third-largest airline rejected a bid by Singapore Airlines to buy a minority stake on Tuesday after a rival Chinese carrier offered more money in an unusual public takeover battle involving two state-owned companies.
China Eastern Airlines supported the Singapore bid, which would have brought the struggling carrier foreign expertise. But around 78% of shareholders rejected the deal, the airline said.
The rejection was a blow to Singapore’s efforts to gain a foothold in China’s booming air travel market, which is expected to become the world’s largest in the next two decades. It came after Air China, another state-owned carrier, made a last-minute public offer to top the Singapore price.
Regulators say China needs to create bigger carriers to compete with foreign rivals, and Air China is believed to be eager to lead such consolidation. China Eastern chairman Li Fenghua said the carrier would look for other ways to cooperate with Singapore and rejected any relationship with Air China. Analysts have said that could lead to China Eastern being absorbed by its Beijing-based rival.
“We will never consider Air China as a strategic investor,” Li told reporters. “The most important thing is not the price. But to improve China Eastern Airlines’ brand and management.” The Singapore offer prompted a Western-style campaign by both sides to woo minority public shareholders. The battle could reflect the start of a new round of restructuring of China’s airline industry.
The market is dominated by three state-owned carriers — Air China, China Eastern and China Southern Airlines — all of which have sold shares to public investors on the Hong Kong and Shanghai stock markets. The government is yet to issue a blueprint for consolidation, but officials have talked about possibly going so far as to create a single, giant Chinese airline.
Still, the Chinese cabinet approved the Singapore deal and the state agency that ultimately owns both China Eastern and Air China said it would let shareholders decide the deal on economic grounds.
Because of that, financial analysts said the Air China bid appeared to be a purely commercial effort by a competitor to increase its control over the China market.
“The SIA deal had the backing of the government, so this really is a domestic action ... by a rival wanting to take over another,” said Pete Harbison, chairman of the Center for Asia Pacific Aviation, a consulting group.
Singapore Airlines and its parent, the government investment agency Temasek Holdings, offered HK$7.2 billion or around HK$3.80 a share, for a 24% stake in China Eastern.
China Eastern Airlines supported the Singapore bid, which would have brought the struggling carrier foreign expertise. But around 78% of shareholders rejected the deal, the airline said.
The rejection was a blow to Singapore’s efforts to gain a foothold in China’s booming air travel market, which is expected to become the world’s largest in the next two decades. It came after Air China, another state-owned carrier, made a last-minute public offer to top the Singapore price.
Regulators say China needs to create bigger carriers to compete with foreign rivals, and Air China is believed to be eager to lead such consolidation. China Eastern chairman Li Fenghua said the carrier would look for other ways to cooperate with Singapore and rejected any relationship with Air China. Analysts have said that could lead to China Eastern being absorbed by its Beijing-based rival.
“We will never consider Air China as a strategic investor,” Li told reporters. “The most important thing is not the price. But to improve China Eastern Airlines’ brand and management.” The Singapore offer prompted a Western-style campaign by both sides to woo minority public shareholders. The battle could reflect the start of a new round of restructuring of China’s airline industry.
The market is dominated by three state-owned carriers — Air China, China Eastern and China Southern Airlines — all of which have sold shares to public investors on the Hong Kong and Shanghai stock markets. The government is yet to issue a blueprint for consolidation, but officials have talked about possibly going so far as to create a single, giant Chinese airline.
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Still, the Chinese cabinet approved the Singapore deal and the state agency that ultimately owns both China Eastern and Air China said it would let shareholders decide the deal on economic grounds.
Because of that, financial analysts said the Air China bid appeared to be a purely commercial effort by a competitor to increase its control over the China market.
“The SIA deal had the backing of the government, so this really is a domestic action ... by a rival wanting to take over another,” said Pete Harbison, chairman of the Center for Asia Pacific Aviation, a consulting group.
Singapore Airlines and its parent, the government investment agency Temasek Holdings, offered HK$7.2 billion or around HK$3.80 a share, for a 24% stake in China Eastern.
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