CNAC: SQ's bid for MU 'unfair and cheap'

[KeithMEL]

http://www.theaustralian.news.com.au...-23349,00.html

AIR China's parent may vote against Singapore Airline's acquisition of rival China Eastern after calling the bid unfair and cheap.

China National Aviation Corp has called a $US920 million ($1 billion) investment by Singapore Airlines in rival carrier China Eastern unfair and too cheaply priced, suggesting the aviation firm will vote against the impending acquisition.

In the first formal expression of its views, CNAC - which owns more than 12 per cent of China Eastern - urged China Eastern, Singapore's flag carrier and investment group Temasek Holdings to return to the negotiating table to tweak their acquisition proposal, but did not elaborate.

[huaiwei]

Is Air China able to make a fairer and expensive counter bid then? Some Chinese officials apparently seem to think that one giant Chinese airline will be less anti-competitive than having foreign investors coming into the market.

[LionCity]

I believed that CNAC has won their political battle and doubt they will go ahead without the blessing of the Central Government. There goes the connectivity from SQ to China Eastern leading to other Chinese Cities.

[abraxis]

The article reads two ways:

#1: Anything PRC makes is worth many times more than it's actual value BECAUSE it's a mainland chinese company when it comes to selling to foreigners. Air China will now lowball and take it over in the name of the country...

OR

#2: Air China *** want competition and will use it's combined role as competitor and regulator to quash any real competition in the so-called "deregulated" airline industry over there.

Either case, what a load! Does SQ actually see some benefit from this deal? How would it be different than its investments in Virgin Atlantic or Air New Zealand?

[787]

Air China vows higher bid in China Eastern battle

HONG KONG, Jan 6 (Reuters) - Air China's 0753.HK parent vowed on Sunday to pay at least 32 percent more for a coveted slice of China Eastern 0670.HK than rival suitor Singapore Airlines SIAL.SI had agreed to, upping the ante in their contest for China's No.3 carrier.

In an 11th-hour attempt to derail Singapore Air's and Temasek Holdings' [TEM.UL] year-long effort to buy 24 percent of China Eastern, Air China's parent pledged to pay at least HK$5.00 a share if stockholders were to reject Singapore's HK$3.80 offer at a Tuesday shareholders' meeting.

China National Aviation Corp (Group) Ltd (CNAC), unveiling a prospective acquisition price for the first time, added that it planned to submit a bid within two weeks.

But the firm made no mention of Cathay Pacific 0293.HK, Air China's startegic partner, which some market observers had believed would jump onboard a rival bid.

"The Singapore Airlines proposal merely brings together one China-based airline, one Singapore-based airline and an investment agency and lacks the synergy potential that can be created by the cooperation of two major China-based airlines," CNAC argued in a lengthy statement.

"In the event that the Singapore Airlines proposal fails to be approved at the EGM, we intend to propose to assume the role of Temasek and Singapore Airlines."

The firm's latest salvo marks an escalation in an increasingly acerbic conflict between two of China's largest carriers -- days ahead of a closely-watched shareholders' vote whose outcome is hard to forecast.

CNAC, which owns an overall 3.9 percent of China Eastern 600115.SS CEA.N -- but more than 12 percent of its Hong Kong stock -- plans to vote against Singapore Airlines' proposal during the Jan 8 shareholders' meeting.

The firm, whose Air China 601111.SS is the world's biggest airline by market value, has called Singapore Airline's offer too cheap, unfair and demanded sweetened terms.

Both Singapore Air and China Eastern have countered by saying the deal -- to buy into an airline that had made losses in three of the past five years -- was fair at about six times the airline's end-2006 book value.

On Saturday, a government agency that oversees state-run firms -- and hence supervises all the Chinese firms involved in the contest -- denied it would seek to influence the outcome of the vote.

If approved, the Singapore Airlines deal would give the world's most profitable carrier coveted access to China's booming travel industry ahead of the 2008 Olympics, but also create a formidable rival to Air China on its own home turf -- at a time of record global oil prices.

In return, Shanghai-based China Eastern would get much-needed cash, international expertise and industry know-how. (Reporting by Edwin Chan; Editing by David Cowell)

[BOEING777]

An alternate view on SQ, CA and MU.

Clicky

[787]

Singapore Air Fails in Bid to Buy Stake in China Eastern Air

By Irene Shen

Jan. 8 (Bloomberg) -- Singapore Airlines Ltd. failed to win approval to buy a stake in China Eastern Airlines Corp., clearing the way for Air China Ltd.'s parent to make a higher offer and become the nation's dominant carrier.

Minority shareholders of Shanghai-based China Eastern voted today against selling a 24 percent stake in the nation's third- largest carrier to Singapore Air and its parent Temasek Holdings Pte. for HK$7.16 billion ($918 million).

The decision is a victory for Air China and Hong Kong-based affiliate Cathay Pacific Airways Ltd. as they seek to block their rival's access to the world's second-largest aviation market. Air China's parent, holder of about 10 percent of China Eastern's minority shares, pledged to pay at least 32 percent more for the stake should the Singapore Air deal be rejected.

``The Air China offer is better and it has the advantage of being from a state-owned company,'' said Han Gang, who helps manage the equivalent of $8 billion at Great Wall Asset Management Co. in Shenzhen. ``The government must have wanted to re-open the opportunity for consolidation among the country's carriers.'' Great Wall owns shares in both China Eastern and Air China, the nation's largest international carrier.

No New Offer

Singapore Air won't raise its offer, which followed at least a year of talks, as ``nothing is a must-have,'' Chief Executive Officer Chew Choon Seng said on Dec. 12. Still, scrapping the bid will hamper its ability to challenge Air China and Cathay Pacific in China, where air travel may grow fivefold by 2026, according to Boeing Co.

``There may be other opportunities in the future but nothing has the same long-term appeal as China Eastern,'' said Derek Sadubin, chief operating officer of the Sydney-based Centre for Asia-Pacific Aviation, which advises airlines. ``China Eastern has a strong existing market share in Shanghai, the economic powerhouse of China, and exceptional growth potential.''

Air China's parent, China National Aviation Holding Co., said on Jan. 6 that it would offer to buy a 24 percent stake in China Eastern for at least HK$5 a share within two weeks of the Singapore deal being rejected.

Singapore Air and Temasek agreed to buy the stake, comprising new shares priced at HK$3.80 apiece, in September. China Eastern's parent was also due to buy HK$4.2 billion of new shares at the same price to maintain its majority.

To contact the reporter on this story: Irene Shen in Shanghai at ishen4@bloomberg.net .

[abraxis]

China Eastern rebuffs CNAC's buy-in proposal

Published January 22, 2008

(HONG KONG/SHANGHAI) China Eastern, the country's third biggest airline, yesterday snubbed an approach by bigger rival Air China's parent to buy a US$2 billion stake, triggering the steepest daily loss in Air China's shares.

China Eastern said that the proposal from China National Aviation Corp (CNAC) to buy up to 30 per cent of the carrier was incomplete and insincere.

The proposal came 10 days after China Eastern shareholders, led by CNAC, rejected a deal to sell 24 per cent of China Eastern to Singapore Airlines (SIA) and investment firm Temasek for US$920 million.

Air China slumped more than 15 per cent yesterday, more than twice the 7 per cent drop on the index of Chinese firms listed in Hong Kong, even after the airline said that it was not involved in any acquisition talks.

'People are selling Air China shares as it is still unclear whether the proposal will include any share swap or earnings dilution,' said a fund manger, on condition of anonymity.

Investors also feared that Air China might be roped in to help bankroll CNAC's attempt to buy into the loss-making and heavily indebted China Eastern.

CNAC, which owns 3.9 per cent of China Eastern and had complained that SIA was buying its China Eastern stake too cheaply, is trying to push through its proposal at a time of record oil prices and slumping markets, hammered by deepening fears of a US recession.

Reports that China raised jet fuel prices in the first quarter also helped dent aviation shares. Rival China Southern Airlines slid 9 per cent yesterday.

Some analysts foresee SIA, the world's most profitable airline, returning to the negotiation table, but others doubt that it would engage in a bid war with Air China.

SIA had hoped to gain access to a fast-growing travel market as increasingly wealthy Chinese take to the skies, but Air China, the world's most valuable carrier by market capitalisation, fears the entry of a world-class rival, especially in Shanghai, where it has a lower profile.

'If Singapore Air refuses to improve its price, the chance of it winning a deal is next to nil,' said Li Lei, aviation analyst with China Securities.

'Singapore Air is in a better position to extend China Eastern's global network and improve its governance. But the synergy as a result of an Air China- China Eastern tie-up is obvious as it would give them the power to set prices, especially on the domestic trunk routes,' he added.

A SIA spokesman said that the company's position had not changed, and reiterated that its offer was full and fair.

The collapse of the SIA deal, two years in the making and blessed by Chinese authorities, highlighted the increasing aggression of state-owned Chinese corporations that once typically bowed to Beijing's political will.

'It seems the odds are on Air China, as it came up with a better price that no one else is willing to match,' said Ma Ying, an analyst with Haitong Securities, adding that Air China's case may be bolstered by its ex-chairman Li Jiaxiang's move to the country's top aviation regulatory post.

'Li's promotion is also a big help for Air China as an alliance with China Eastern would create a Chinese super-carrier, as Li hopes.' - Reuters

[LionCity]

If the deal does not smell right at a higher price, SQ should just shun it. Let Airline China and China Eastern worked it out. There is probably serious politics between the two competitors that has not helped after the fallout of SQ's investment. China Eastern's management might be feeling that they have been squeezed into a corner by Air China. They will be comfortable dealing with SQ taking a minority stake.

I speculate that SQ is just sitting and let the two companies sort it out. If things go SQ's way, they might come in with a raised bid. What do you all think?

[Singapore_Air]

Singapore Airlines won't come in at a raised bid, but it seems that the relationship, if any, between CEA and those rude people at CNAC is getting more catty and bitchy.

[LionCity]

Singapore Airlines won't come in at a raised bid, but it seems that the relationship, if any, between CEA and those rude people at CNAC is getting more catty and bitchy.

Singapore_Air, watch out...I am sure SQ's competitors are monitoring your comments closely as they know you have an inside track of SQ's decision making process and planning. Now they know for sure SQ is not coming on a higher bid!

[zvezda]

Letting CNAC buy a major stake in CEA would be very anti-competitive and would demonstrate incompetence on the part of China's antitrust authorities. It would be a major step backwards in the development of China's economy.

[huaiwei]

And now news sufaces of some kind of cooperation between CEA and CSA. That sounds far more pallatable, and on hindsight, a combined CEA-CSA can actually rival the AC-CX alliance if done well. SQ should then consider allying with this enlarged entity!