Ctrip to invest RMB 3 billion in China Eastern Airlines
Ctrip has agreed to invest RMB3 billion in China Eastern's A shares through a private placement and may elect to further increase its ownership stake in the airlines
Chinese OTA leader Ctrip.com International (Ctrip) and China Eastern Air (China Eastern), parent company of China Eastern Airlines announced their entry into a strategic collaboration agreement.
Under the agreement, Ctrip has agreed to invest RMB3 billion (about $463 million) in China Eastern Airlines' A shares through a private placement of shares. Ctrip may elect to further increase its ownership stake in China Eastern Airlines following the placement (possibly up to 10%, according to a report of Bloomberg) in the next twelve months and may be entitled to appoint an observer or a director to China Eastern Airlines' board of directors, subject to the satisfaction of certain conditions such as ownership thresholds.
Bloomberg reported Ctrip is to buy 3.55% of China Eastern and the deal is part of the airline's plan to finance purchase of planes for further expansion.
The stake held by the state-owned parent of the airline, China Eastern Air, will decrease to about 52% from about 62% upon dilution as the listed unit sells shares to fund the spending plan, Ma said. Current rules prohibit the parent’s stake to drop below 50%, he said.
Xulun Ma, general manager of China Eastern Airlines, said on March 12 that the carrier was actively pursuing state ownership reform and to further reduce state-own shares of the carrier’s stake to encourage more investments from the market.
The Shanghai-based carrier predicted a 60-70% net profit growth for the first quarter this year due to robust demand and lower fuel prices.
Ctrip and China Eastern will collaborate with each other on a broad range of products and services such as low-cost transportation solutions, international air travel, IT technology, travel insurance, and e-commerce.
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