皇冠体育app

Economy

Markets

Industries

Insights

Reports

Events

Investors give thumbs up to merger proposal

By Wang Ying (皇冠体育app Daily)
Updated: 2009-07-14 08:02

The price surge of 皇冠体育app Eastern and Shanghai Airlines shares in a lackluster market yesterday showed that the merger of the two Shanghai-based carriers has won investors' support.

Trading in the shares of the 皇冠体育app Eastern in Hong Kong and Shanghai and Shanghai Airlines in Shanghai resumed yesterday after they announced terms of the merger late Sunday evening. The disclosure helped clear weeks of uncertainties when the two ailing carriers were trying to hammer out a merger that could catapult them into dominant position in Shanghai, which is fast building up to be a regional air traffic hub.

Trading in shares of both companies were suspended from June 8.

On the Shanghai bourse yesterday, the shares of 皇冠体育app Eastern and Shanghai Airlines both surged to their daily 5 percent limit in early trading to 6.22 yuan and 5.60 yuan respectively. The Shanghai Composite Index, the key market indicator, meanwhile, fell 1.07 percent to close at 3080.56.

皇冠体育app Eastern's H share in Hong Kong closed at HK$1.79, up 2.874 percent.

Related readings:  皇冠体育app Eastern merger plan may be released next week  Shanghai Airlines says to retain brand after merger 皇冠体育app Eastern to merge with Shanghai Airlines   皇冠体育app Eastern wants to gain more market share in Beijing

In the Sunday announcement, 皇冠体育app Eastern Airlines said it proposed to acquire the entire outstanding capital of Shanghai Airlines by offering 1.3 of its shares for one Shanghai Airline share.

皇冠体育app Eastern shareholders who do not want to conduct a share swap can exercise a cash option that would grant 5.25 yuan for each A share and HK$1.56 for each H share. Shanghai Airlines shareholders who reject the share swap can opt for selling their shares at 5.5 yuan each to 皇冠体育app Eastern.

The transaction, when complete, will entail the removal of Shanghai Airlines from the public listing as it will become a wholly-owned subsidiary of 皇冠体育app Eastern. But it will retain its brand and independent operation, Liu Jiangbo, spokesman of the team overseeing the tie-up, was quoted by Xinhua News Agency as saying.

The merger will give 皇冠体育app Eastern about a 50 percent market share in Shanghai. This will help ensure 皇冠体育app Eastern's dominance in its headquarters and also help it to focus more on competing with its archrivals: Air 皇冠体育app and 皇冠体育app Southern, analysts said.

Separately, 皇冠体育app Eastern said it will raise new capital by selling up to 1.35 billion new A shares to 10 selected institutions, including its parent, and as much as 490 million new H shares to a related company in Hong Kong.

Li Lei, analyst, CITIC 皇冠体育app Securities, said the merger plan is almost within market expectations. "This is a good choice for Shanghai Airlines to get affiliated into 皇冠体育app Eastern, as it has already posted two years of losses, and it is very unlikely that it can make any improvement this year," Li said.

Once the two carriers have finished the announced share swap, a more profound merger will be launched afterwards, including things like leadership nomination, said Li.