China's state assets watchdog on Friday issued an indirect
denial of reports it had pressured shareholders of China Eastern
Airlines into approving an investment by Singapore Airlines.
The Financial Times reported earlier in the week that the
government was trying to persuade shareholders to agree to China
Eastern's 24 percent stake sale to SIA and Lentor Investments, a
unit of Temasek Holdings after Air China expressed reservations
over the proposed deal.
In a vague, two-sentence statement which made no mention of
China Eastern, the State-owned Assets Supervision and
Administration Commission (SASAC) said, "Chinese
central-government-owned companies conduct business independently
and in line with market principles."
"We support the state-owned giants having overseas strategic
investors."
The planned sale is shrouded in uncertainty after China National
Aviation Corporation (Group) (CNAC), a major CEA shareholder, said
on Thursday it would make a counter-offer if shareholders reject
the deal at a meeting to be held in Shanghai next Tuesday.
The CNAC, which holds 12.07 percent of China Eastern's H shares,
is a wholly-owned subsidiary of China National Aviation Holding
Company (CNAHC), parent of flag carrier Air China.
The Hong Kong-based company said Wednesday that the offer price
of 3.8 H.K. dollars does not reflect the fair value of China
Eastern and the deal is unfair to other shareholders and domestic
airlines as it includes anti-dilution rights and a non-competition
clause.
The CNAC went further to say that the deal is a potential hurdle
to the future development of the nation's civil aviation
industry.
The CNAC added that it will not accept an unrevised deal,
calling for a renegotiation and deal revisions to make it more
acceptable to other shareholders.
The CEA, however, responded that it would not consider deals
other than the one with SIA, adding the offer price is reasonable
as it was agreed after long, market-based talks between the
carriers.
The response has aroused discontent from many small and
medium-sized shareholders, complaining that the airline fails to
take into consideration their interests by blocking potential
higher price bidding, the China Securities Journal reported
Saturday.
The CNAHC and Hong Kong-based Cathay Pacific Airways have
offered in September to buy rival CEA's H shares at a higher price
of 4.85 H.K. dollars apiece, earlier media reported.
The potential higher-priced offer may help to sway other
shareholders away from CEA's tie-up plan. It needs approval of
two-thirds of the small and medium-sized H and A shareholders
before becoming effective.
The deal, if passed, can offer CEA managerial expertise apart
from cash injection, and SIA access to China's rapidly growing
aviation market in return.
The market is currently dominated by three state-owned airlines,
Air China, China Eastern and China Southern, based in the
metropolises of Beijing, Shanghai and Guangzhou, respectively.
Li Jiaxiang, CNAHC general manager and board chairman of Air
China, was recently promoted to the head of General Administration
of Civil Aviation.
Li has been longing for an alliance with China Eastern to gain
more access to Shanghai market, a move to build Air China into a
"super carrier" to better vie with foreign rivals for larger market
shares.
(Xinhua News Agency January 6, 2008)
