Shareholder's claim adds uncertainty to China Eastern, Singapore Airlines deal

China Eastern Airlines' stake sale to Singapore Airlines and Lentor Investments was left in uncertainty after one of its major shareholders claimed the deal did not reflect fair value.

China National Aviation Corporation (Group) (CNAC) said in a statement that the offer price of 3.8 Hong Kong dollars apiece did not reflect the fair value of the Shanghai-based Eastern Airlines and called for deal revisions.

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), parent company of the country's largest international carrier, Air China.

The deal, which included antidilution rights and a noncompetition clause, was unfair to other shareholders and domestic airlines and may become a potential hurdle to the future development of the nation's whole civil aviation industry, it stated.

The CNAC urged the three concerned parties to renegotiate the deal and change some clauses to make it more acceptable to other shareholders.

It reserved the right to make further, more acceptable proposals in the interests of all shareholders, noted the statement on Wednesday.

Earlier media reported that the CNAHC and Hong Kong-based air carrier Cathay Pacific had offered to buy rival China Eastern's H shares at a higher price of 4.85 apiece in September.

The H shares of China Eastern, one of China's three biggest state-owned carriers, plunged 11.06 percent to finish at 7.16 HK dollars on Thursday.

The statement indicated that the CNAHC may vote against China Eastern's private placement of 1.88 billion H shares, or 24 percent of the expanded capital, to Singapore Airlines and Lentor Investments, a unit of Temasek Holdings.

The deal needs approval of two-thirds of China Eastern's H and A shareholders at a meeting in Shanghai next Tuesday before becoming effective.

Analysts said the statement, coupled with the promotion of Li Jiaxiang, general manager of the CNAHC and board chairman of Air China, to the head of General Administration of Civil Aviation, has added uncertainty to the share placement of China Eastern.

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

Luo Zhuping, board secretary of China Eastern, said the ompanywould not respond to the statement, insisting the offer price was fair and the share sale plan had got government approval.