CNAC to bid if China Eastern's Singapore deal fails

China National Aviation Corporation (Group)(CNAC), a major shareholder in China Eastern Airlines (CEA), said it would make a counter-offer if the carrier's deal with Singapore Airlines (SIA) failed to get shareholder approval next Tuesday.

CNAC said in a statement late on Thursday it would not accept the deal if no revisions were made.

The Hong Kong-based CNAC, which holds 12.07 percent of China Eastern's H shares, is a wholly-owned subsidiary of China National Aviation Holding Company (CNAHC), Air China's parent.

China Eastern, one of country's three big state-owned carriers, agreed to sell 1.88 billion H shares, or 24 percent of the expanded capital, to SIA and Lentor Investments, a unit of Temasek Holdings.

CNAC said in another statement earlier the week the share offer price of 3.8 Hong Kong dollars (48 U.S. cents) did not reflect a fair value of China Eastern. It called for a renegotiation and deal revisions to make it more acceptable to other shareholders.

The deal, which included anti-dilution rights and a non-competition clause, was unfair to other shareholders and domestic airlines. It could become a potential hurdle to the future development of the nation's civil aviation industry, it stated. The Shanghai-based airline said it would not consider deals other than the one with SIA. The offer price was reasonable as it was agreed after long, market-based talks between the carriers, it added.

The two announcements indicated CNAC would vote against the private placement. It needs approval of two-thirds of China Eastern's H and A shareholders at a meeting to be held in Shanghai on Tuesday before becoming effective.

The possible new counter-bid could help to persuade other small shareholders to cast no votes to block the passage of the share sale deal, Friday's Shanghai Securities News quoted an analyst as saying.

Earlier media reports said CNAHC and Hong Kong-based Cathay Pacific Airways had offered to buy rival China Eastern's H shares at a higher price of 4.85 H.K. dollars apiece in September.

H shares of China Eastern plunged 11.06 percent to finish at 7.16 H.K. dollars on Thursday.

The statements, coupled with the promotion of Li Jiaxiang, CNAHC general manager and board chairman of Air China, to the head of General Administration of Civil Aviation, have added uncertainty to the share placement of China Eastern, the Shanghai Securities News said.

Li had sought to build Air China into a "super carrier" by restructuring domestic airlines, a move to compete with foreign competitors for larger market shares.