Cathay's Dragonair Takeover Expected Soon
Hong Kong's Cathay Pacific Airways was negotiating on Wednesday towards a takeover of rival Dragonair in a deal said to be worth roughly USD$1.3 billion that could be announced within 24 hours, sources familiar with the situation said.
Shares in five listed firms involved in the deal were suspended for a third day on Wednesday as the companies and their investment bankers hammered out a complicated transaction that also includes Beijing-run Air China and requires government approval.
The long-anticipated deal would give Cathay Pacific access to the booming market of mainland China, where its passenger service is now limited to Beijing and Xiamen. Unlisted Dragonair, a regional carrier based in Hong Kong, serves 23 mainland cities including the core Shanghai market.
"The next few hours are crucial," Henry Fan, managing director of CITIC Pacific, told reporters.
Beijing-controlled conglomerate CITIC Pacific was negotiating to sell its 28.5 percent stake in Hong Kong Dragon Airlines, better known as Dragonair, to Cathay. China National Aviation Co. (CNAC), Dragonair's largest shareholder with 43.3 percent, was also in talks to sell its stake to Cathay.
Cathay already holds a 17.8 percent stake in Dragonair. Cathay parent Swire Pacific has a separate 7.71 percent holding in Dragonair.
The cash and stock deal being negotiated could see Air China, which controls CNAC, becoming Cathay's third-largest shareholder after Swire and CITIC Pacific, a Hong Kong newspaper has said, strengthening a relationship under which Cathay holds 10 percent of Air China.