China National Aviation Corp (CNAC) has vowed to bid at least 32 per cent higher for a stake in China Eastern than that offered by Singapore Airlines, in the process bringing matters to a head in the contest for China's No 3 carrier.
In a last ditch attempt to derail Singapore International Airline's and Temasek Holdings' effort to buy 24 per cent of China Eastern, CNAC pledged to pay at least $0.641 a share if stockholders were to reject Singapore's $0.487 offer at a Tuesday shareholders' meeting.
CNAC said that it would submit a bid within two weeks.
CNAC argues that the Singapore Airlines proposal merely brings together one China-based airline, one Singapore-based airline and an investment agency and lacks the synergy that can be created with two major China-based airlines coming together.
CNAC, which owns an overall 3.9 per cent of China Eastern, but more than 12 per cent of its Hong Kong stock, plans to vote against Singapore Airlines' proposal during the shareholder meeting.
CNAC, which owns a majority shareholding in Air China, the world's biggest airline by market value, has called Singapore Airline's offer too cheap and unfair.
Singapore Airline and China Eastern argue that the deal, which values the loss-making airline at about six times the airline's end-2006 book value, was fair. China Eastern made losses for three of the past five years.
If the deal passes muster at the shareholder's meeting, Singapore Airlines, which is the world's most profitable carrier, would gain coveted access to China's booming travel industry ahead of the 2008 Olympics. This would create a formidable rival to CNAC-owned Air China on its own home turf.
Shanghai-based China Eastern has argued that the deal would provide it with much-needed cash, international expertise and industry know-how.