Andrzej Jeziorski/SINGAPORE
The Taiwanese Government-owned China Development Bank (CDB)has declared an interest in buying a 35.5% stake in China Airlines (CAL), days after Singapore Airlines (SIA) dropped its bid.
CDB is an investment arm of Taiwan's ruling Nationalist Party and owns about 2% of CAL together with another party fund. The bank had publicly opposed negotiations with SIA, whichhad hoped to buy the minimum share sufficient to give it significant management influence at CAL.
Initial talks focused on a 5-10% stake, although SIA later said it would buy up to 25% from the carrier's major shareholder, the China Aviation Development Foundation (CADF), which owns 71% of the airline.
CADF later decided it wanted to sell half its equity in one single tranche, however. Disagreements also arose with SIA over the price of the stake according to recent share prices, 25% would have cost NT$12 billion ($37 million), while CADF says it wants to raise NT$20 billion with the sale of the 35.5% tranche, to fund a proposed new aviation training centre in Taipei.
According to CADF, it has not entered into talks with CDB and is holding off until it has appointed a financial advisor to handle negotiations. The exclusivity agreement struck with SIA, which was to have remained valid until the end of January, is no longer binding.
CADF says CAL needs an equity partner which can tighten up its operation, improve safety standards and polish the airline's public image, particularly tarnished after the crash of an Airbus A300-600R at Taipei last February.
It doubts, therefore, whether CDB alone would be a good buyer for the CAL stake. "We really do want another airline," says CADF, adding that it remains open to any further proposal from SIA in partnership with another investor, to save the airline having to buy the entire 35.5% tranche.
While SIA says it has discontinued investment talks and dropped plans for a commercial alliance with CAL, Singaporean communications minister Mah Bow Tan says he hopes to boost air links between the countries, and to co-operate on the aviation training centre plans.
CADF says that it selling half its equity in CAL mainly because its position as a non-profit foundation promoting Taiwanese aviation is not always compatible with the goals of a profit-making airline.
Source: Flight International
