August 18, 2009
HONG KONG (AFP) - Flag carrier Air China and Hong Kong conglomerate Swire Pacific said Monday they planned to boost their stakes in airline Cathay Pacific by acquiring shares held by troubled Citic Pacific.
In a deal worth 7.35 billion Hong Kong dollars (942 million US), Swire will maintain its controlling Cathay stake while Air China will boost its own shareholding in the airline to 29.99 percent.
This would give the Chinese flag carrier a stake just under the 30 percent threshold that would require it to make a mandatory offer for Cathay's shares.
Air China will pay Citic 6.34 billion dollars for a 12.5 percent stake in the Hong Kong-based airline, while Swire will pay 1.01 billion dollars for an additional two percent, raising its controlling stake to just under 42 percent. Once completed, the transactions will sharply reduce Citic's stake in the Hong Kong airline, to 2.98 percent from 17.5 percent.
Citic's sell-down comes as the Chinese conglomerate continues efforts to divest non-core businesses and sell stakes in companies in which it does not have a controlling interest, as it recovers from huge losses last year.
The company, whose interests range from iron-ore mines to property, made a net loss of 12.66 billion dollars in 2008 on the back of bad foreign exchange bets, after a 10.84 billion dollar profit in 2007.
It booked a 14.63 billion dollar loss from unauthorised currency trading after bets on the Australian dollar soured when the greenback unexpectedly rose against it.
The incident sparked an investigation by Hong Kong's Securities and Futures Commission into the firm's entire board of directors.
The move to offload Cathay shares comes despite chairman Chang Zhenming's comments in May that Citic had no plans to sell its stake despite ongoing efforts to raise capital.
Chang replaced former chairman Larry Yung, who resigned after a police raid on Citic Pacific's headquarters in April following the forex losses.
-- Dow Jones Newswires contributed to this report--
