Hong-Kong-based Cathay Pacific Airways Ltd plans to invest in China Eastern Airlines Corp, in a move that could derail rival Singapore Airlines Ltd's deal to acquire a stake in the mainland carrier, according to today's Nanfang Daily citing a report from Channel News Asia.
The UK's Daily Telegraph, citing South China Morning Post, said that the Cathay bid for a large stake in China Eastern is worth US$4 billion.
Cathay's move, which will build on Air China's existing 11 percent stake in China Eastern, is expected to trigger a bidding war over the routes owned by China's third-largest carrier.
Sources close to Temasek Holdings Pte Ltd, an investment arm of the Singapore government helping Singapore Airlines with its bid for a 24 percent stake for US$923 million, said it would "inevitably" respond to any blocking move by Cathay.
Singapore Airlines agreed early this month to buy a 15.7 percent stake in Shanghai-based China Eastern, whose share price has more than doubled in the past month. Temasek Holdings agreed to simultaneously buy an additional 8.3 percent of China Eastern shares.
It remains unclear as to how far Cathay can go with its bid.
South China Morning Post said the Cathy bid must first be approved by two thirds of its stock holders, and sources close to the situation said the bid is still uncertain.
China Eastern gained as much as 8 percent to HK$10.50 and changed hands at HK$9.75 at the 12:30 p.m. trading break in Hong Kong, on course for its seventh consecutive day of gains. Singapore Airlines declined to its lowest in a month. Cathay Pacific and Air China, which own stakes in each other, have halted their shares pending announcements.
(Chinadaily.com.cn September 24, 2007)