Swire, Citic Pacific, Cathay Sell Stakes In Cargo Unit

May 25, 2010

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Swire Pacific, CITIC Pacific and Cathay Pacific Airways said they have agreed to sell their combined 40 percent stakes in Hong Kong Air Cargo Terminals (HACTL) and HACTL Investment Holdings (HIHL) for a total of HKD$2.56 billion (USD$328 million).

The stakes would be sold to existing shareholders of HACTL and HIHL, including Jardine, Matheson, Wharf (Holdings), Hutchison Whampoa's Mosgen, Hutchison Port Holdings, and China National Aviation Corporation, the statement said.

CITIC Pacific would sell its entire 10.002 percent holding for HKD$640 million. Swire would sell its 19.998 percent interests for HKD$1.28 billion, and aviation associate Cathay would sell its entire 10 percent interest for HKD$640 million, it said.

It added that each company would use the proceeds for general working capital.

The sale of interests in HACTL by Cathay fulfils an undertaking made to the Airport Authority Hong Kong in March 2008, when the company was awarded a franchise to invest, construct and operate a new air cargo terminal at Hong Kong International Airport, Swire and Cathay said in a separate statement.

Cathay, a unit of Swire Pacific and 29.9 percent held by Air China, said it had resumed development of a HKD$5.5 billion (USD$705 million) air cargo terminal in Hong Kong, suspended in January 2009 because of the economic downturn.

"The new cargo terminal is an important investment not just for Cathay Pacific, but also for Hong Kong," Swire and Cathay Chairman Christopher Pratt said in the statement. "We are continuing to look at ways to develop our network and freighter frequencies out of Hong Kong."

China is pushing the country's three major airlines, Air China, China Eastern Airlines and China Southern Airlines, to merge their cargo operations in a bid to claw back business in a market dominated by foreign carriers, the South China Morning Post reported on Tuesday, citing sources.

The plan may put a cargo venture by Cathay Pacific and Air China at risk, according to a source familiar with the cargo talks.

A Cathay spokeswoman said a preparation team for the cargo venture had been set up since March and its target of having the joint venture carrier become operational this summer remained unchanged.

In February, Cathay agreed to take a 49 percent stake in Air China Cargo. The venture is still subject to final approval by the Chinese government.

(Reuters)