China denies pressing Eastern Air shareholders
SHANGHAI, Jan 5 (Reuters) - China's government has denied it is pressing shareholders to approve a US$920 million investment by Singaporean companies in China Eastern Airlines (600115.SS) (0670.HK), while saying it supports such deals in principle.
A two-sentence statement by the state-owned Assets Supervision and Administration Commission, quoted by official media on Saturday, leaves the outcome of shareholders' meetings to vote on the investment next Tuesday shrouded in doubt.
It also underlines the government's difficulties in balancing its desire to restructure industries through foreign investment with domestic criticism that China is selling some of its major corporate assets too cheaply.
"Chinese central government-owned companies conduct business independently and in line with market principles," said the commission, which has ultimate control of China Eastern (CEA.N) and other big state-run companies.
The official Xinhua news agency said this was a denial of speculation earlier in the week that Beijing was pressuring China Eastern's minority shareholders, who will meet in Hong Kong and Shanghai on Tuesday, to approve the Singaporean investment.
But the commission's statement, which did not mention China Eastern by name, also said: "We support the state-owned giants having overseas strategic investors."
A spokesman for the commission could not be reached on Saturday to elaborate on the statement.
Singapore Airlines (SIAL.SI) and Singaporean investment agency Temasek [TEM.UL] signed an agreement in November to buy 24 percent of China Eastern, China's third biggest carrier, for HK$7.16 billion. The deal received Chinese government approval.
But China National Aviation Corp (CNAC), which owns 12 percent of China Eastern's Hong Kong-listed shares, said on Thursday it would make a counter-offer for China Eastern if Tuesday's shareholder meetings rejected the Singaporean deal.
CNAC, parent of Chinese flag carrier Air China (601111.SS) (0753.HK)AIRC.UL, called the Singaporean investment "unfair" to shareholders and too cheaply priced.
Hong Kong's Ming Pao newspaper reported CNAC planned a HK$5 a share counter-offer for China Eastern, topping Singapore's bid of HK$3.80 per share. China Eastern's Hong Kong-listed shares have been trading around HK$7.0.
Some analysts believe the Chinese government may now be unwilling to take a public stance on the Singaporean deal because leaning towards either camp could be embarrassing.
Supporting a higher counter-bid by CNAC could be seen as unfriendly toward foreign investors, who have the expertise to help make China's airlines and other industries globally competitive.
But coming down in favour of Singapore's investment would expose the government to domestic criticism that it was favouring foreigners at the expense of Chinese investors.
The official China Securities Journal reported on Saturday that "many small and medium-sized shareholders" in China Eastern were dissatisfied that they were not being given the opportunity to vote on a higher bid by CNAC.
Last year, China's regulators blocked several previously agreed deals for foreign investors to take big stakes in Chinese companies, after the booming stock market pushed the share prices of the Chinese firms well above the original deal prices.
At China Eastern's shareholders meetings on Tuesday, the Singaporean deal will need the approval of two-thirds of minority owners of the airline's Hong Kong-listed H shares, and two-thirds of minority holders of its Shanghai-listed A shares.
The state assets commission is not expected to vote the government's majority stake.
Air China has an alliance with Hong Kong-based Cathay Pacific Airways (0293.HK), the main rival of Singapore Airlines in Asia. ($1 = HK$7.8) (Reporting by Andrew Torchia, editing by Mike Peacock)
