China Eastern drops to a 17-month low
China Eastern Airlines Corp fell to the lowest in 17 months after saying it had no immediate plans to reopen discussions about selling a stake to Singapore Airlines Ltd.
“There’s no timetable for resuming the talks now,” Board Secretary Luo Zhuping said yesterday. The Shanghai-based carrier dropped 7 percent to HK$2.14 (US$0.27) in Hong Kong trading.
China Eastern has plunged 68 percent since minority shareholders vetoed the sale of a 24-percent stake to Singapore Airlines and parent Temasek Holdings in January. The carrier has since tried to revive the deal, while fending off a higher offer from the parent of Air China Ltd.
“Given China Eastern’s current share price, it will be very hard to make any progress on the stake sale,” said Kelvin Lau, an analyst at Daiwa Institute of Research in Hong Kong. “Even if they do resume negotiations after the Olympic Games, the result won’t be favorable.”
China Eastern, the country’s third-largest carrier, agreed to sell new shares at HK$3.80 to the Singaporean investors in September. The carrier wanted a deal in order to cut its debt and to benefit from Singapore Airlines’ management expertise.
The sale was vetoed by minority shareholders after Air China’s parent pledged to make a higher offer. Air China’s parent, China National Aviation Holding Co, subsequently offered to buy the new stock at HK$5. China Eastern rejected the deal on February 26, saying it was unclear and lacked sincerity.
Air China’s parent owns 12 percent of China Eastern’s Hong Kong-listed stock, according to data complied by Bloomberg News.
Singapore Airlines has repeatedly said that it won’t raise its bid to match the Air China offer. Still, the carrier and China Eastern “maintain a dialogue,” Singapore Air spokesman Stephen Forshaw said yesterday. The Singaporean deal was originally due to expire today.
China Eastern still needs a partner to help it survive as surging fuel prices are cutting airlines’ profitability, said Lau. “They won’t deny the possibility of cooperation with Singapore Airlines until they find a new partner.”
Tags: Air-China, China-Eastern-Airlines