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Air China to Buy Control of Shenzhen Airlines

Date Posted:2010-03-23   Author:    Source:Original site

Air China Ltd. will gain control of Shenzhen Airlines Ltd. through a 682.1 million yuan (US$100 million) investment.

Air China’s stake in the Shenzhen-based carrier will rise to 51 percent from 25 percent following the capital injection, it said in a statement yesterday.

Shenzhen International Holdings Ltd. will also invest 348 million yuan and raise its stake to 25 percent.

A majority stake in Shenzhen Airlines, China’s fifth-biggest carrier, will allow Air China to challenge Guangzhou-based China Southern Airlines Co. in the Pearl River Delta, China’s manufacturing hub.

Beijing-based Air China, which failed in a bid to buy Shenzhen Airlines in 2005, took management control of the carrier in December after police began a probe of the smaller airline’s top executive and largest shareholder, Li Zeyuan.

“This is definitely a good move for Air China,” said Li Lei, an analyst at China Securities Co. in Beijing. “The carrier has now built up a balanced network all over the country.”

Li Zeyuan’s company, Shenzhen Huirun Investment Co., is facing a creditors’ bankruptcy case, which has been accepted by the Shenzhen Intermediate People’s Court, Air Chinasaid.

A second Shenzhen Airlines executive, Li Kun, is also under investigation, company spokesman Liu Hang said March 7.

Shenzhen Huirun’s stake in Shenzhen Airlines will drop to 24 percent from 65 percent under the restructuring, Air China said.

The investment company’s liquidator waived the right to inject more capital into Shenzhen Airlines, Air China said. (SD-Agencies)