Singapore Airlines and China Eastern to push alliance in spite of negative vote

Both Singapore International Airlines (SIA) and China Eastern Airlines (CEA) have said that they will not walk away from their attempt to forge an alliance, involving stake sale to SIA and its investment arm Temasek, despite a rejection of SIA's bid by the Chinese carrier's minority shareholders.

China Eastern Airlines chairman, Li Fenghua, insisted yesterday that the carrier's plan to sell a 25% stake to Singapore Airlines and Temasek was not dead in spite being rejected by more than 77% of CEA's minority shareholders. Li has articulated his antipathy to a tie-up with Air China in the recent past. He re-stated his opposition immediately after the vote, telling reporters Tuesday, '' We won't give up our deal with SIA as it is the best cooperative partner for us. . .We are aware that it's a long-term process to [convince] minority shareholders [to back the sale], but we will keep working on it."

Interestingly, he added that another shareholder conference will take place in three months and a vote will be taken again.

Meanwhile, SIA said it would continue to pursue the stake purchase. "Singapore Airlines is disappointed that the proposed transaction involving an equity stake in China Eastern Airlines did not receive the required level of support from independent shareholders," it said in a statement.

It added that it "will continue to support the building of a relationship with China Eastern" and pointed to the fact that CEA and SIA are "mutually willing" to enter into a partnership. SIA reiterated that its offer represented "full and fair value."

SIA's spokesman Stephen Forshaw said the airline sees China Eastern providing the right platform for SIA's interest in China. He said that SIA is still talking to China Eastern but that it will not get into a bidding war as the price was full and final and fair, being the maximum justified keeping business fundamentals in mind.

China Eastern said yesterday that 94.04 per cent of its A-shareholders and 74.70 percent of H-shareholders turned down a proposal by SIA and its parent Temasek Holdings to buy a 24 percent stake in the Shanghai-based carrier for US$0.487 a share. Two-thirds of minority holders of both types of shares needed to approve the deal for it to pass.

The holders opted instead for a promise by China National Aviation Holding, the parent of Air China, to offer within two weeks a counter-bid of at least $0.641 a share for a stake in CEA, in a deal that could potentially involve Hong Kong's Cathay Pacific Airways.