Air China to invest USD100 million for control of Shenzhen Airlines

Air China announced (22-Mar-2010) plans to inject CNY682 million (USD100 million) into Shenzhen Airlines, for a majority stake in the carrier. Following the completion of the transaction, Shenzhen Airlines will become a subsidiary of Air China. Details include:

• Capital Increase Agreement: Air China Limited entered into the Capital Increase Agreement with Total Logistics and Huirun, pursuant to which Air China and Total Logistics have agreed to make capital contribution of CNY1.0 billion (USD151 million) in aggregate to Shenzhen Airlines, of which Air China will contribute CNY682 million (USD100 million) to subscribe for an additional registered capital of CNY339.4 million (USD49.7 million) and Total Logistics will contribute CNY348 million (USD51 million) to subscribe for an additional increased registered capital of CNY173.1 million (USD25 million);
• Huirun Bankruptcy: Huirun has filed for bankruptcy, with a liquidation committee being designated by the Intermediate People's Court of Shenzhen to take responsibility of the winding up affairs of Huirun. Huirun's liquidator has waived, on behalf of Huirun, its right to subscribe for the additional registered capital and agreed that Air China and Total Logistics shall subscribe for the entire additional registered capital of Shenzhen Airlines;
• Registered Capital: Following the capital increase, the registered capital of Shenzhen Airlines would be CNY812.5 million (USD119 million);
• Ownership: Following the capital increase, the shareholdings of Air China, Total Logistics and Huirun in Shenzhen Airlines would be 51%, 25% and 24%, respectively. This represents a change from 25%, 10% and 65% prior to the transaction;
• Reasons for transaction: According to Air China, the capital increase in Shenzhen Airlines will "alleviate the pressure on the cash flow of Shenzhen Airlines and be favourable to the improvement of the financial position of Shenzhen Airlines". Air China added that the new shareholding structure will be "more conducive to the business cooperation between the Company and Shenzhen Airlines, and the improvement of their respective networks of domestic air routes and international air routes and to consolidate their market positions in the Pearl River Delta Region, and through the resulting synergy, further boost the competitive strengths of Shenzhen Airlines and the Company";
• Shenzhen Airlines: Shenzhen Airlines is China's fifth largest carrier, with more than 100 aircraft and more than 14,000 employees. [more]