China Eastern Airlines has proposed taking over Shanghai Airlines through a share swap. Cited was ‘a person familiar with the situation’, a chap who seems to always be available in situations like this.
If true — and it seems most likely — it is a reflection of the government’s need and determindation to sort out the airlines of China.
These are, the article suggests: ‘plagued by operational inefficiencies, unhealthy competition and the global recession.’
It is suggested that this is also a long-overdue step toward boosting Shanghai’s status as an international aviation hub, especially as the city gears up to host the 2010 World Expo.
Under the proposal, China Eastern will raise RMB7 billion ($1.02 billion) via a private placement in both Shanghai and Hong Kong to complete the merger.
China Eastern will swap 1.3 of its Shanghai-listed A shares for each Shanghai Airlines A share the ‘person familiar with the situation’ told Dow Jones Newswires. The swap price for China Eastern’s shares was set at RMB5.28 each and at RMB5.50 for Shanghai Airlines.
Wall Street Journal Online said that on the completion of the proposed takeover, China Eastern plans to conduct a ‘flash placement’ of at least 180 million additional H shares to meet the Hong Kong stock exchange’s regulatory requirement on a minimum public float.
It is a fair bet that the ‘person familiar with the situation’ has got it right.