Leo Hairy-Camel
8th Jun 2006, 10:51
Fascinating developments in the mysterious East, according to the Financial Times. Given past rather public enmities, should be interesting to observe the parachutes from Dragon management. Can’t wait to see how the unions get on together, and merging seniority lists is always such a terrific spectator sport.
Cathay Pacific to take over Dragonair
By Justine Lau and Tom Mitchell in Hong Kong
Published: June 5 2006 10:05 | Last updated: June 5 2006 22:33
Cathay Pacific is set to take over Dragonair, its smaller rival, in a long-awaited deal that will give Hong Kong’s de facto flag carrier much wider access to China’s tightly-regulated skies.
In return, Air China, the country’s national carrier and Dragonair’s largest shareholder, will gain a stake in Cathay, according to people close to the negotiations.
The transaction, expected to be announced this week, will help to clear the complex shareholding structure between the three airlines and their parent companies, which have been in restructuring talks for months.
The deal will give Cathay a strong boost as the carrier has been attempting for years to expand its presence in China’s fast-growing aviation market. Cathay pulled out of the mainland market in 1990 after buying a stake in Dragonair, which mainly flies between Hong Kong and China.
Cathay returned to China in 2003 but still only flies passengers to two mainland cities – Beijing and Xiamen in south-east China.
Dragonair, meanwhile, has been expanding rapidly and serves 23 mainland destinations – more than any other non-Chinese airline. It is also highly profitable.
Analysts said there was a compelling strategic argument for Cathay to take over Dragonair and create one of the strongest networks in Asia.
The skies are clearing around Cathay Pacific. The Hong Kong airline has weathered more storms than most.
Although the benefits to Air China seem less obvious, analysts said the deal would help the country cement its relationship with Cathay, which has a 10 per cent stake in the Chinese carrier, as it seeks to become a more serious player in the international aviation market.
Air China will also profit from its stake in the merged Cathay/Dragonair, which is expected to be even better run and more efficient than the current Dragonair.
According to a Hong Kong newspaper report, Cathay, which has a 17.8 per cent stake in the unlisted Dragonair, would pay at least HK$10bn (US$1.29bn) to buy out other shareholders in the airline.
Air China controls 43.3 per cent of Dragonair through a Hong Kong-listed subsidiary called China National Aviation Holding.
Citic Pacific, a Beijing-backed conglomerate, owns 25.4 per cent of Cathay and has a 28.5 per cent stake in Dragonair.
Swire Pacific, Cathay’s largest shareholder with a 46.4 per cent stake, also owns 7.7 per cent of Dragonair.
After the deal, Cathay will become sole owner of Dragonair, which is expected to maintain its brand.
Citic is expected to lower its stake in Cathay.
Shares in Cathay, Air China, Citic, Swire and CNAC were suspended from trading on Monday.
The companies declined to comment.
Cathay Pacific to take over Dragonair
By Justine Lau and Tom Mitchell in Hong Kong
Published: June 5 2006 10:05 | Last updated: June 5 2006 22:33
Cathay Pacific is set to take over Dragonair, its smaller rival, in a long-awaited deal that will give Hong Kong’s de facto flag carrier much wider access to China’s tightly-regulated skies.
In return, Air China, the country’s national carrier and Dragonair’s largest shareholder, will gain a stake in Cathay, according to people close to the negotiations.
The transaction, expected to be announced this week, will help to clear the complex shareholding structure between the three airlines and their parent companies, which have been in restructuring talks for months.
The deal will give Cathay a strong boost as the carrier has been attempting for years to expand its presence in China’s fast-growing aviation market. Cathay pulled out of the mainland market in 1990 after buying a stake in Dragonair, which mainly flies between Hong Kong and China.
Cathay returned to China in 2003 but still only flies passengers to two mainland cities – Beijing and Xiamen in south-east China.
Dragonair, meanwhile, has been expanding rapidly and serves 23 mainland destinations – more than any other non-Chinese airline. It is also highly profitable.
Analysts said there was a compelling strategic argument for Cathay to take over Dragonair and create one of the strongest networks in Asia.
The skies are clearing around Cathay Pacific. The Hong Kong airline has weathered more storms than most.
Although the benefits to Air China seem less obvious, analysts said the deal would help the country cement its relationship with Cathay, which has a 10 per cent stake in the Chinese carrier, as it seeks to become a more serious player in the international aviation market.
Air China will also profit from its stake in the merged Cathay/Dragonair, which is expected to be even better run and more efficient than the current Dragonair.
According to a Hong Kong newspaper report, Cathay, which has a 17.8 per cent stake in the unlisted Dragonair, would pay at least HK$10bn (US$1.29bn) to buy out other shareholders in the airline.
Air China controls 43.3 per cent of Dragonair through a Hong Kong-listed subsidiary called China National Aviation Holding.
Citic Pacific, a Beijing-backed conglomerate, owns 25.4 per cent of Cathay and has a 28.5 per cent stake in Dragonair.
Swire Pacific, Cathay’s largest shareholder with a 46.4 per cent stake, also owns 7.7 per cent of Dragonair.
After the deal, Cathay will become sole owner of Dragonair, which is expected to maintain its brand.
Citic is expected to lower its stake in Cathay.
Shares in Cathay, Air China, Citic, Swire and CNAC were suspended from trading on Monday.
The companies declined to comment.