SIA kept waiting by China Eastern
SHANGHAI – Loss-making China Eastern Airlines has asked the government for advice before it commits to the sale of a stake to investors. including Singapore Airlines.
The Chinese airline has been in talks with authorities in the hope of clarifying outstanding regulatory issues that could impact on any deal with investors.
China Eastern shares have surged recently in anticipation of a deal with SIA.
According to the Centre for Asia/Pacific Aviation, China Eastern “is in need of a foreign partner to help guide its turnaround and capitalise on the enormous opportunities presented by its location in China’s economic powerhouse, Shanghai.
“SIA is sitting on cash balances of over USD2.5 billion and has indicated that Mainland China is a priority investment target.”
Analysts believe both sides are anxious to complete a deal but they say negotiations have been drawn out because of a disagreement over what the state-owned Chinese airline is worth.
Bankers involved in the deal said the proposed price for a 20-25 per cent stake in the carrier had increased from an estimated US$500m to more than US $800m in the past year, thanks to the spike in the company’s share price.
Rival Air China has been buying up China Eastern stock and holds close to 8.5 per cent of its Shanghai-listed shares.
Ian Jarrett
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