Singapore Airlines’ plan to buy a significant chunk of China Eastern seemed to be proceeding smoothly. Singapore’s flag carrier was to buy a 15.7% stake in the Shanghai-based airline while its parent company Temasek Holdings would simultaneously buy a 8.3% stake.
The combined 24% stake is worth US$926.3 million. The State Council and China Eastern’s board approved the deal.
Then, stories started circulating that a competitor wanted to hijack the acquisition. A lead suspect, Hong Kong carrier Cathay Pacific, suspended trading of its shares on September 21, saying that it had a “proposed transaction” in the works. The speculation intensified.
Reports said Cathay was planning a US$4 billion bid for a stake in China Eastern. Cathay and Air China each own 17.5% of one another’s share and Air China has an 11%. According to the rumors, Air China would leverage this interest to secure the deal for Cathay.
Days later, the stories were at once confirmed and made redundant. Cathay said it would not bid for China Eastern (without having made an offer in the first place). Air China agreed that no such deal would happen. Observers said October’s Communist Party Congress – and Beijing’s desire to preserve the status quo – prompted the Chinese leadership to put an end to the deal.