American Airlines in talks to buy China Southern stake
03/22/2017|11:10:39 AM|Bloomberg

The negotiations focus on an investment of about USD 200 million by Fort Worth, Texas-based American in China Southern’s Hong Kong-listed shares. The sale will likely take place via a private placement. China Southern has a market value of about USD 10 billion.

Under the discussions, American would nominate to the Chinese company’s board an observer -- a representative without voting rights. Details of a deal are subject to change and a transaction could still fall through.

An investment in China Southern would allow American to strengthen its presence in a market that the International Air Transport Association predicts will surpass the U.S. to become the world’s biggest in terms of passenger numbers by 2024. Delta Air Lines acquired a minority stake in China Eastern Airlines in 2015.

A sale of a stake in China Southern would represent the Chinese government’s efforts to diversify ownership of state-controlled enterprises. Authorities have urged firms in industries including power, energy, defense and aviation to take measures this year to broaden ownership.

China Southern is the last of the nation’s top three airlines to bring in a non-mainland Chinese strategic investor. Cathay Pacific Airways owns about 18 percent of flagship Air China. Besides Delta, Shanghai-based China Eastern also counts online travel services provider Ctrip among its shareholders.

American connects 350 destinations in 50 countries, mostly in North America, the Caribbean, South America and Europe. It has flights from major U.S. cities to Beijing and Shanghai. China Southern -- with a fleet of 684 aircraft as of June 2016, the largest in Asia -- flies to 208 destinations across 40 countries and has been expanding on routes to Australia, New Zealand and Southeast Asia.

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