American Air to invest $200 million in China Southern deal

Bloomberg

American Airlines Group Inc. agreed to acquire a minority stake in China Southern Airlines Co. for $200 million, cementing a partnership between the top carriers in the U.S. and Asia.
China Southern will issue 270.6 million shares in its Hong Kong-listed company to the world’s largest airline at HK$5.74 apiece, the Guangzhou-based carrier said in a stock exchange statement. That is a premium of 5.3 percent over the closing price before Bloomberg News reported the talks last week. The two airlines also agreed on code sharing, according to the statement.
American Air will hold 2.68 percent of China Southern’s total issued shares, Asia’s largest carrier by passengers said in the filing.
The agreement will boost Fort Worth, Texas-based American Air’s presence in China, one of the world’s fastest-growing aviation markets, which the International Air Transport Association predicts will surpass the U.S. to become the biggest in terms of passengers by 2024. The deal will also help the expansion plans of China Southern, which indicated in January that it was considering bringing in strategic investors.
China Southern is the last of the nation’s top three airlines to bring in a non-mainland Chinese strategic investor. Cathay Pacific Airways Ltd., based in Hong Kong, owns about 18 percent of flag carrier Air China Ltd. Delta Air Lines Inc. acquired a minority stake in China Eastern Airlines Corp. in 2015.
“For the price of one widebody aircraft, American could finally be securing a major mainland partner, but it’s a long road,” said Will Horton, a senior analyst at the CAPA Centre for Aviation in Hong Kong. The two “need to show over the long term this isn’t an alliance of the leftovers.”
China Southern has a market value of about $10 billion.
The Shanghai-listed stock rose 0.8 percent to close at 7.94 yuan, after climbing as much as 4.3 percent earlier when it resumed trading following a halt since March 23. The shares traded in Hong Kong fell 2.7 percent to HK$5.34, after closing at a seven-month high Monday following China Southern’s confirmation that it was in negotiations with American Air.