(Xinhua)
Updated: 2008-01-05 18:57

BEIJING - China's State assets watchdog on Friday issued an indirect denial of reports it had pressured shareholders of China Eastern Airlines into approving an investment by Singapore Airlines.

The logo of China Eastern Airlines is seen on this plane. China's state assets watchdog on Friday issued an indirect denial of reports it had pressured shareholders of China Eastern Airlines into approving an investment by Singapore Airlines. [File photo]

The Financial Times reported earlier in the week that the government was trying to persuade shareholders to agree to China Eastern's 24 percent stake sale to SIA and Lentor Investments, a unit of Temasek Holdings after Air China expressed reservations over the proposed deal.

In a vague, two-sentence statement which made no mention of China Eastern, the State-owned Assets Supervision and Administration Commission (SASAC) said, "Chinese central-government-owned companies conduct business independently and in line with market principles."

"We support the State-owned giants having overseas strategic investors."

The planned sale is shrouded in uncertainty after China National Aviation Corporation (Group) (CNAC), a major CEA shareholder, said on Thursday it would make a counter-offer if shareholders reject the deal at a meeting to be held in Shanghai next Tuesday.

The CNAC, which holds 12.07 percent of China Eastern's H shares, is a wholly-owned subsidiary of China National Aviation Holding Company (CNAHC), parent of flag carrier Air China.

The Hong Kong-based company said Wednesday that the offer price of 3.8 HK dollars does not reflect the fair value of China Eastern and the deal is unfair to other shareholders and domestic airlines as it includes anti-dilution rights and a non-competition clause.

Related readings:  China Eastern waits for shareholders on Singapore Air deal  China Eastern deal likely to go through  Singapore Airlines, Temasek buy 24% stake in China Eastern

The CNAC went further to say that the deal is a potential hurdle to the future development of the nation's civil aviation industry.

The CNAC added that it will not accept an unrevised deal, calling for a renegotiation and deal revisions to make it more acceptable to other shareholders.

The CEA, however, responded that it would not consider deals other than the one with SIA, adding the offer price is reasonable as it was agreed after long, market-based talks between the carriers.

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