China Eastern rebuff to Singapore

Singapore did not raise its bid after Air China offered to pay more

Shareholders in China Eastern Airlines have rejected Singapore Airlines' bid for a 24% stake in the country's third largest carrier.

The $920m (£465m) bid needed to get a two-thirds majority of both Shanghai and Hong Kong shareholders.

The bid was backed by the Singapore government investment vehicle Temasek.

Its rejection may open the door to other offers for China Eastern such as one from its bigger rival Air China, possibly backed by Cathay Pacific.

Air China rejected

Singapore Airlines' bid for a stake in China Eastern had looked certain to go through until Air China said it would pay more if shareholders rejected the tie-up.

However, China Eastern chairman Li Fenghua said Singapore was still his ideal partner and that he would not consider Air China as a strategic partner.

"Air China is at the same level as China Eastern," he told reporters.

"This type of 'one plus one' will not be more than two," he added.

Singapore Airlines said it was "disappointed" that shareholders had rejected its offer, but said it would continue to try to build a strategic alliance with China Eastern.

"Singapore Airlines will continue to support the building of a relationship with China Eastern, noting that the airlines are still mutually willing to develop the relationship," it said in a statement.

One analyst stressed that the Shanghai-based domestic carrier needed an outside investor.

"China Eastern would be worried about their financial position now," said Eva Yip from Sun Hung Kai Financial in Hong Kong.

"There's a need for the introduction of a foreign investor, to ease their financial burden."