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Singapore Air, Temasek to Buy 24% of China Eastern

Saturday 02/09/2017 - Source: Bloomberg


Singapore Airlines Ltd. and parent Temasek Holdings Pte agreed to pay about $918 million for a 24 percent stake in China Eastern Airlines Corp., as economic growth boosts air travel in the world's most populous country.

Singapore Airlines and Temasek agreed to acquire Hong Kong- listed shares of China Eastern at HK$3.80 apiece, representing a premium of 1.9 percent to the closing price on May 21.

Temasek said it would buy 649 million new China Eastern shares, giving it an 8.3 percent stake, the Shanghai-based carrier said today in a statement. Singapore Airlines will buy 1.235 billion shares for a 15.7 percent stake. China Eastern's parent company, China Eastern Air Holding Co., will buy 1.1 billion new shares, giving it a 51 percent stake.

The purchase is a good opportunity for all as the potential demand for air travel is huge, said Teng Ngiek Lian, who manages $2 billion at Target Asset Management in Singapore, including Singapore Airlines shares. ``China Eastern is the only Chinese airline that hasn't done well, which says a lot about management, and that's where Singapore Airlines can help,'' he said.

The shares can't be sold within three years of the contract's closing date, according to the statement. However, Temasek is allowed to transfer shares to Singapore Airlines during this period.

China Eastern, the nation's third-largest carrier, will expand its board to 14 members from 11 members. Temasek will have the right to appoint one new member and Singapore Airlines will have the right to appoint two new members. The three companies will cooperate in six areas, including flights, operations, service, procurement, training and marketing.


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