Swire offers 64 percent premium to take aircraft maintenance unit HAECO private

HONG KONG (Reuters) - Cathay Pacific Airways Ltd 0293.HK shareholder Swire Pacific Ltd 0019.HK said it plans to take maintenance unit Hong Kong Aircraft Engineering Co Ltd 0044.HK private for about HK$3 billion ($382 million), citing low levels of trade in its shares.

“HAECO has not raised any equity funds from the public equity markets for over 30 years and Swire Pacific sees no practicable opportunity for this to happen in the foreseeable future,” the conglomerate said in a statement.

Swire said it would offer HK$72 per share, a 63.6 percent premium over HAECO’s previous close, to buy all outstanding shares it did not already own.

HAECO shares climbed nearly 58 percent to HK$69.50, their highest level in nearly three years.

Swire holds 74.99 percent of HAECO, while independent shareholders hold the rest. The conglomerate said the move would save administrative and listing-related costs.

The offer values the aircraft maintenance service firm at about HK$12 billion.

HAECO is one of the world’s largest independent aircraft maintenance, repair and overhaul (MRO) providers. Cathay, in which Swire Pacific owns 45 percent, is a major client in Hong Kong and shares some of the same board directors.

It also owns large MRO operations in mainland China and the United States that are used by other airlines in competition with other groups like Singapore's Singapore Technologies Engineering Ltd STEG.SI and SIA Engineering Company Ltd SIAE.SI.

HAECO reported a HK$541 million annual loss in 2017, compared with a HK$975 million profit a year earlier, due in large part to impairments on its U.S. business.

The HAECO buyout comes after Swire Pacific in February named Merlin Swire, a member of the controlling Swire family, as the company’s new chairman to succeed John Slosar from July 1.

Slosar, the current chairman of Swire Pacific, HAECO, Swire Properties Ltd 1972.HK and Cathay Pacific, will retain only the Cathay role from that date, with Merlin Swire taking on the three other roles.

Before the Swire Pacific takeover offer was announced, HAECO shares had fallen 12 percent so far this year. That compared with a 3.5 percent gain in the Hang Seng Index .HSI.

Swire Pacific shares eased 0.7 percent mid-morning.

($1 = 7.8463 Hong Kong dollars)

Reporting by Donny Kwok in Hong Kong and Jamie Freed in Singapore; Editing by Edwina Gibbs