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Cathay expects late-August completion of Dragonair takeover
Nicholas Ionides, Singapore (05Jul06, 02:16 GMT, 364 words)

Cathay Pacific Airways expects to complete its proposed takeover of fellow Hong Kong-based carrier Dragonair next month following a shareholders’ vote.

The Oneworld alliance carrier announced last month that it had agreed to buy the 82.21% of Dragonair that it does not already own for HK$8.22 billion ($1.1 billion) from Air China-owned China National Aviation (CNAC), CITIC Pacific, Swire Pacific and a handful of minority shareholders.

Air China and CNAC will in turn acquire a combined 17.5% of Cathay from CITIC and Swire for HK$5.4 billion, while Cathay will double its stake in Air China to 20% for HK$4.1 billion.

Cathay says in the latest issue of staff newsletter CX World that it expects the Dragonair takeover to be formally completed “late August after ratification by shareholders”. It adds that a vote in favour must come from minority shareholders as Swire and CITIC, which are the biggest single shareholders in Cathay, will be excluded from voting since they are connected parties.

The takeover of Dragonair will allow Cathay to expand its limited presence in China, which is something it has been trying to do for some time. Dragonair earns most of its revenue from China services and currently serves 23 destinations in the country, while Cathay serves just three: Beijing, Xiamen and Shanghai, the latter only with freighters.

As part of the takeover deal Cathay will retain the Dragonair brand for six years although it will be managed by the larger airline. Cathay chief operating officer Tony Tyler also says Cathay will continue to serve China with its own aircraft, “underlining how both carriers will operate separately to give passengers wider product choice”.

“We are paying a full price for Dragonair, but it is worth it for us,” he says.

“Our combined network will be hugely powerful. With 16 flights a day to Shanghai, eight to Beijing and more than 126 a week to other cities, Dragonair has by far the biggest mainland network outside any mainland carrier.

“For Cathay Pacific to organically grow that network would take forever and we can’t afford to wait that long. Dragonair has very attractive slots at Beijing and Shanghai too. Both those airports are pretty much full.”

Source: Air Transport Intelligence news