Singapore deal: China Eastern in firm stand

CHINA Eastern Airlines won't accept any new proposal from other carriers and is committed to its cooperation deal with Singapore Airlines.

The Shanghai-based carrier made this clear yesterday after Air China, the country's biggest airline group by market value, expressed an interest in cooperating with China Eastern.

China National Aviation Holding Co, parent of Air China Ltd and a 10-percent shareholder of China Eastern, said it may offer to buy another 24 percent of China Eastern if shareholders reject Singapore Airlines' HK$7.16 billion (US$918 million) bid.

China National said in a statement on Wednesday that it will float a new proposal if the Singapore deal fails to get minority shareholder approval at a meeting next Tuesday.

China National, owning 12.07 percent of China Eastern's Hong Kong-listed shares, expects both firms to review the deal or it won't be accepted.

"China National hasn't received any order that requires it to support the Singapore deal," the statement said.

Singapore Airlines and its parent, Temasek Holdings Pte, are seeking to buy 24 percent of China Eastern at HK$3.80 a share to expand into China's growing aviation market. Under the deal, China Eastern's parent company will also invest HK$4.2 billion to maintain its majority.

The deal needs approval from two-thirds of China Eastern's minority owners.

China Eastern shares fell one percent yesterday to 20.63 yuan (US$2.83) in Shanghai and dropped 3.6 percent to HK$6.92 in Hong Kong. Air China rose 0.3 percent to 29.19 yuan in Shanghai and advanced 1.5 percent to HK$10.80 in Hong Kong.

"The concern now is about China Eastern," Target Asset Management's Chief Executive Officer Teng Ngiek Lian, who manages US$3 billion of Asian stocks including Singapore Airlines, told Bloomberg News.

China Eastern insists that the price is reasonable: "The proposed price ... is six times the book value at the end of 2006, much higher than other deals of its kind."