[photopress:Air_Xiaoye_Wang.jpg,full,alignright]The Financial Times has a story from DealReporter which brings a new twist to the idea of China Air taking a share in Eastern Airlines after it was considered a done deal with Singapore Airlines.
China’s legislative anti-trust adviser Xiaoye Wang told DealReporter that if China National Aviation Corporation (which is the company that owns China Air) buys into China Eastern Airlines, it would be considered as monopolistic behavior.
She suggested that China’s Ministry of Commerce (MOC), the current regulatory body that is in charge of anti-trust review, would not approve CNAC’s offer for CEA.
Her summary is that China has just three major airlines, including CNAC’s listed subsidiary Air China, China Eastern and China Southern Airlines.
If CNAC bought into China Eastern it would therefore significantly reduce the number of players and could have a negative impact on ticket prices.
When asked to comment on whether it would still be considered as monopolistic behavior if CNAC acquired just a minority stake in CEA, Wang said an anti-trust review would assess not just the stake size, but would also focus on the acquirer’s control over the target. She described CNAC’s proposed acquisition of a nearly 30% stake in CEA as significant.
This has, as far as is known, has never come up before as an argument but, if valid, throws a serious spanner in the moves being made by CNAC on behalf of Air China.
Bradley S. Lui, a partner at the law firm Morrison & Foerster said that at present neither China’s M&A regulations nor Article 20 of the Anti-trust Law provided definitions for the meaning of control, decisive influence, or the notification threshold of notification. However, the 2005 draft of China’s Anti-trust Law indicated that acquisitions of a 20% stake could trigger the notification.
No doubt it will all eventually be sorted out.
Source: Financial Times