Cathay Buys Dragon Airlines

Elena
09 Jun, 2006
New York City

The deal would be completed after receiving the approval of shareholders in the next two months. Cathay Pacific said in a published notice it would pay Dragon Airlines shareholders HK$820 million ($105.6 million) in cash, with the rest of the acquisition funded by new Cathay shares.

[R]8:00AM Cathy Pacific Airways agreed to acquire Dragon Airlines.[/R]
Cathay Pacific Airways Ltd. agreed to acquire Hong Kong Dragon Airlines Ltd for $1.05 billion and double its stake in Air China in a deal aimed at giving Cathay a larger share of the world''s fastest growing aviation market. The quality of operations for both companies is expected to improve dramatically.

The HK$8.22 billion deal terminates two years of complex negotiations, making ‘the world''s most significant aviation alliance’. The deal would be completed after receiving the approval of shareholders in the next two months. Cathay Pacific said in a published notice it would pay Dragon Airlines shareholders HK$820 million ($105.6 million) in cash, with the rest of the acquisition funded by new Cathay shares. It would also pay HK$4.7 billion ($605.5 million) to increase its stake in Air China by another 10% to reach a total of 20%. Air China will pay HK$5.39 billion ($694.4 million) for 10.16% of Cathay, and the two carriers will team up to form a Shanghai-based cargo airline. Cathay said that Dragonair will keep its own brand for six years as part of the deal. Cathay previously held 17.8% of Dragonair. As part of the deal, the shareholding of Cathay will change, with Swire Pacific moving lower in its stake to 40%, from 46.3%. Chinese conglomerate CITIC Pacific Ltd. will see its stake in Cathay decrease to 17.5% from 25.4%. China National Aviation Co., Dragonair''s parent, will hold 7.34% of Cathay. The carrier''s stocks soared 7% to HK$13.85 ($1.78) on Hong Kong''s stock exchange, with 56 million shares changing hands.


[R]7:30AM Asian shares bounce back on overseas upbeat mood.[/R]
Asian markets finished higher. Tokyo''s Nikkei 225 Stock Average rose 117.81 points, or 0.8%, to 14750.84 following a 462.98-point drop Thursday. Machinery stocks rose, with Komatsu soaring 6.2% and Fanuc advancing 1.2%. In Hong Kong, the Hang Seng Index advanced 1.16% to 15628.69, with HSBC Holdings and China Mobile gaining and Cathay Pacific advancing 0.7%, following its takeover of Hong Kong Dragon Airlines. Taiwan stocks bounced back with the Weighted Price Index of the Taiwan Stock Exchange advancing 112.82 points, or 1.8%, to 6444.63 after shedding 4.2% on Thursday. South Korea’s, Kospi gained 1.02%, or 12.52 points, to 1235.65, after declining 6.6%, or 85.91 points, to a seven-month low during the previous three trading sessions. Only China bucked the trend as the Shanghai Composite Index, tracking both Class A and Class B shares, shed 2.52% to 1551.38 and the Shenzhen Composite Index lost 2% to 397.66.


[R]6:30AM Europe recoups losses from Thursday in early trading.[/R]
European markets opened higher. The FTSE 100 in London was1.45 to 5,641.8, the Xetra Dax in Frankfurt advanced 1.4% to 5,457.17 and the CAC-40 in Paris rose 1.4% to 4,749.87. Stocks among Thursday’s big decliners led the gainers. Miners outperformed their weighting more than two-fold. Xstrata advanced 3.5% and BHP Billiton rose 3.1%. Sweden’s Atlas Copco having slumped on Thursday on economic growth worries advanced 4%. Electrolux splitting off its outdoor equipment division on Thursday put up 4%. Richemont, the Swiss luxury goods group, advanced 3.9%. Disappointing full-year operating profits pushed the stock more than 12% lower on Thursday. Technology stocks also advanced. Chipmakers Infineon rose 1.7% and STMicroelectronics advanced 2% and mobile phone maker Nokia climbed 2.8%.

Crude oil had advanced 5 cents to $70.40 a barrel by 0300 GMT, after dropping 47 cents on Thursday. London Brent crude climbed 14 cents to $69.19 a barrel. Gold bullion opened Friday at a bid price of $609.10 a troy ounce, lower than $612.90 late Thursday. The dollar gained against the euro. In morning European trading, the euro purchased $1.2639, lower than $1.2646 in New York on Thursday. The British pound dropped slightly to $1.8427 from $1.8428 in New York, while the dollar slid to purchase 113.88 Japanese yen from 114.21 the day before.