(Yicai Global) Sept. 28 -- Spring Airlines has splurged CNY846 million (USD123 million) on privately-issued shares in China's largest carrier, state-owned China Southern Airlines.
Budget airline Spring will acquire a 1.63 percent stake in the target and become its fifth biggest shareholder, the Shanghai-based buyer said in a statement yesterday. It will pay CNY6.02 (87 US cents) a share, almost an 11 percent discount compared with China Southern's [SHA:600029] opening price that day.
The move is a critical step for China Southern as it looks to undergo a mixed ownership reform under direction from the central government, state-backed news site The Paper cited an aviation sector insider as saying. "But Spring probably won't make it to the board of directors because the investment is too small -- the subsequent collaboration is crucial."
China Southern already took American Airlines on board as an investor last year, and is now looking to raise CNY9.5 billion (USD1.4 billion) through private share issues to buy 41 planes and install lightweight seats in its Airbus A320s.
It is Spring's first time investing in the carrier but the second time that a domestic airline has pumped money into a state-owned carrier, after Juneyao Group and Juneyao Airlines invested in China Eastern two months ago.
Spring and China Southern complement each other well in terms of target market, product design and route planning, the statement added, saying Spring is willing to explore a partnership in the budget sector.
Editor: James Boynton