CargonewsAsia
12th Feb 2008
Temasek Holdings and Singapore Airlines remain committed to an alliance with China Eastern Airlines after the foiled bid for a stake in the mainland's third-largest carrier.
Singapore Airlines and its parent, state-backed investment company Temasek, said the next stage was to work with China Eastern to win over shareholders who rejected their proposed bid in favour of rival Air China's higher offer.
Ong Beng Teck, Temasek's managing director of investment, said the company is firmly committed to the deal.
The Singapore companies had offered US$0.487 for each new H share making up a combined 24 percent stake in China Eastern. But China National Aviation, the parent of the mainland's biggest carrier Air China, came up with a better offer of $0.641 per share and the establishment of a strategic partnership.
However, Air China's advances were rebuffed by China Eastern, which dismissed CNAC's offer and said that SIA and Temasek were the only strategic investors they were interested in.
Stephen Forshaw, SIA's vice-president of public affairs, said the China Eastern management remained committed to bring in strategic investors, adding that the Chinese airline executives would have come under immense pressure.
Forshaw said China Eastern would need to continue the dialogue with shareholders and win support for the deal under the current terms on which SIA and Temasek said they would stand firm. Both sides have an exclusivity period until August.
The terms include SIA's role in China Eastern's board and secondment of executives to the carrier to exchange management expertise, as well as co-operation in engineering, flight operations, human resources and training.
Wan Chee Foong, a director of investment at Temasek, said the company hoped the shareholders would see the long-term value of the partnership in operational or financial terms.
Although the Singapore executives indicated this was not a deal to be rushed, they said the sooner it materialised, the better for China Eastern, as much hinged on a recapitalisation to facilitate its restructuring.
A deal would also cement SIA's foothold in mainland markets, but could challenge Air China's Shanghai ambitions.
Forshaw said the proposed deal with China Eastern was a departure from SIA's previous investments, as it not only involved equity but also expertise.
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