By Karen Cho (China Daily)
Updated: 2007-12-14 09:12

The long-awaited strategic cooperation between the mainland's third-largest carrier, China Eastern Airlines, with Singapore Airlines and Temasek is almost a done deal, China Eastern Chairman Li Fenghua said yesterday, hosing down rumors that Air China might move to block it.

In a news conference announcing the final details of the deal, Li said it was next to impossible that Air China's parent company, a shareholder in China Eastern, would vote down the deal at the upcoming extraordinary general meeting on January 8.

"I can tell you that the deal is a (central) government decision, not just a corporate decision," Li said.

Rumors that Air China, 17 percent owned by Cathay Pacific, may attempt to obstruct the deal arose after Air China's parent company spent HK$32 million to increase its stake in China Eastern last week. This came after a failed move by the airline to acquire China Eastern earlier in September.

As hopes for a higher bid evaporated, China Eastern shares plunged 12.7 percent to close at HK$6.53 yesterday.

The strategic deal between China Eastern, Singapore Airlines and the Singapore state investment agency Temasek, has been in the making for more than two years.

Once approved, China Eastern will issue 2.98 billion new H shares at a subscription price of HK$3.8 each.

However, many question whether the price was set too low, since China Eastern shares were already trading at 72 percent over the subscription price yesterday. The chairman disagreed, and explained the figure was derived from the 30-day average closing price of the airline's H shares before its trading suspension in May. "This (new share price) is the only, and the final, proposal that all three parties agreed upon as being fair," Li said.

Trading in China Eastern shares was suspended for more than three months in anticipation of the details of the strategic deal rolling out.