Air China has acquired a majority stake in Shandong Aviation Group and is offering to buy up shares from small and medium shareholders at a price of $0.33 a share. Air China also plans to invest an additional amount of $966.2 million in Shandong Aviation, which will give it a 66% stake.
This share price is considerably less than the firm’s closing price of HKD4.73, but the tender offer was determined in June 2022 when Air China first announced that it would bail out Shandong Airlines based on the weighted average price of the carrier’s shares in the 30 days before the announcement was made. The bid is valid until April 21, 2023.
The investment by Air China in the parent firm of Shandong Airlines is an attempt save the bankrupt airline.
Air China initially paid about CNY33 million (approx. US$4.8 million) to increase its stake in Shandong Aviation to 51.7% from 49.4% through the acquisition of the 2.3% equity held by Shansteel Financial Holdings Asset Management (Shenzhen) and Qingdao Qifa Commerce and Trade, the airline said in a statement.
Another stakeholder, Shandong Hi-Speed, is infusing an additional CNY3.4bn, and will own the remaining equity together with Shandong Finance Investment Group. After the cash injection, Shandong Aviation’s registered capital will rise to CNY10.5bn from CNY580 million.
Shandong Airlines incurred loss of $263 million in 2021 and its debt-to-asset ratio reached 102.81%, making the carrier technically insolvent and triggering a warning from the stock exchange, according to an earlier earnings report.