Wednesday, January 9, 2008

A bid made by Singapore Airlines for a 24% stake in China Eastern Airlines was turned down by minority shareholders.

Talks about a sale started in March 2007 when Singapore Airlines and China Eastern started negotiations about a possible deal. According to Forbes the deal would have helped China Eastern’s earnings and accelerate the consolidation and would have improved the market position of China’s third-largest airline. Talks went on throughout the year and both companies suspended trading of their shares on May 21, 2007, according to a AFP press release.

The vote took place at a shareholder meeting in Shanghai, People’s Republic of China. According to Financial Times Online, the blocking of the SA bid by minority shareholders is bad news for China Eastern Airlines managers, who were and still are in full support of Singapore Airlines, which the Singaporean government owns a 55% stake in via Temasek Holdings.

Financial Times Online says this is most likely due to the fact that Air China not having made any formal bids yet, instead creating many media rumors about a possible purchase. The bid by Air China, that is likely to be larger than that of Singapore Airlines, may be supported by Cathay Pacific, who are in a cross-shareholding relationship with China National Aviation Corp., the parent company of Air China.