Air China's parent vowed on Sunday to pay at least 32 percent more for a coveted slice of China Eastern than rival suitor Singapore Airlines had agreed to, upping the ante in their contest for China's No.3 carrier.
In an 11th-hour attempt to derail Singapore Air's and Temasek Holdings' year-long effort to buy 24 percent of China Eastern, Air China's parent pledged to pay at least HK$5.00 a share if stockholders were to reject Singapore's HK$3.80 offer at a Tuesday shareholders' meeting.
China National Aviation Corp (CNAC), unveiling a prospective acquisition price for the first time, added that it planned to submit a bid within two weeks.
But the firm made no mention of Cathay Pacific, Air China's strategic partner, which some market observers had believed would jump onboard a rival bid.
"The Singapore Airlines proposal merely brings together one China-based airline, one Singapore-based airline and an investment agency and lacks the synergy potential that can be created by the cooperation of two major China-based airlines," CNAC argued in a lengthy statement.
"In the event that the Singapore Airlines proposal fails to be approved at the EGM, we intend to propose to assume the role of Temasek and Singapore Airlines."
The firm's latest salvo marks an escalation in an increasingly acerbic conflict between two of China's largest carriers -- days ahead of a closely-watched shareholders' vote whose outcome is hard to forecast.
CNAC, which owns an overall 3.9 percent of China Eastern -- but more than 12 percent of its Hong Kong stock -- plans to vote against Singapore Airlines' proposal during the Jan 8 shareholders' meeting.
The firm, whose Air China is the world's biggest airline by market value, has called Singapore Airline's offer too cheap, unfair and demanded sweetened terms.
Both Singapore Air and China Eastern have countered by saying the deal -- to buy into an airline that had made losses in three of the past five years -- was fair at about six times the airline's end-2006 book value.
On Saturday, a government agency that oversees state-run firms -- and hence supervises all the Chinese firms involved in the contest -- denied it would seek to influence the outcome of the vote.
If approved, the Singapore Airlines deal would give the world's most profitable carrier coveted access to China's booming travel industry ahead of the 2008 Olympics, but also create a formidable rival to Air China on its own home turf -- at a time of record global oil prices.
In return, Shanghai-based China Eastern would get much-needed cash, international expertise and industry know-how.