Shanghai Juneyao Group planned to halve its stake China Eastern Airlines by no more than 156 million shares (representing 0.826% of the total capital of China Eastern Airlines) due to the necessity of its business plan, according to a share document published by China Eastern Airlines on September 21.
Juneyao Group is the parent company Junyao Airlines. Already in July 2018, Juneyao Group and Juneyao Airlines jointly participated in the 11.8 billion yuan ($1.66 billion) private placement of China Eastern Airlines. Juneyao Group signed up for 7.3 billion yuan ($1.02 billion) and Juneyao Airlines for 2.5 billion yuan ($350 million).
Juneyao Group and Juneyao Airlines will sell the holding company of China Eastern Airlines after the completion of the private placement subscription. By the end of the first half of 2022, Juneyao Group remained the ninth largest shareholder in the top 10 shareholders of China Eastern Airlines with a shareholding of 1.65%. Juneyao Airlines is not among the top 10 shareholders with a share of 1.23%.
Until the sale is completed, Juneyao Group is the ninth largest shareholder in China Eastern Airlines’ top 10 shareholders. Photo: Juneyao Airlines
Juneyao Group’s planned reduction this time is half of its stake in China Eastern Airlines. At the time of writing, China Eastern Airlines shares were trading at 4.84 yuan ($0.68), meaning the reduction would cost Juneyao Group approximately 760 million yuan ($106 million).
However, compared to the purchase price, the current price would be a significant discount, which means that Juneyao Group has decided to sell at a loss.
Reason for sale
The announcement of the reason for the reduction said it was due to “the need for Juneyao Group’s business plan”. In other words, the direct purpose of the low sale is to allow Juneyao Group to obtain available funds and invest in the company’s other businesses.
The information on Juneyao Group’s official website shows that Juneyao Group is a modern service enterprise focused on industrial investment. It has five business sectors, air transport, financial services, modern consumption, educational services and scientific and technological innovation, and it owns four companies listed on the A stock exchange.
Listed airline Juneyao Airlines posted a net loss of 1.889 billion yuan ($2.65 billion) in the first half of 2022. Compared to a profit of 102 million yuan ($14.3 million) for the same period in 2021, the year was a year-on-year decrease of 1,950.18%. On the other hand, the asset-liability ratio increased from 76.97% (end 2021) to 80.61% now.
Juneyao Airlines experienced a record 1950.18% year-on-year decline in H1 2022. Photo: Juneyao Airlines.
In addition, Juneyao Group was recently reported to be planning to enter the automobile industry. He created a new car team after taking over Yundu Auto.
It was now unclear in which sectors Juneyao Group would invest the money.
Early strategic relationship between China Eastern and Juneyao Airlines
China Eastern Airlines also owns shares of Juneyao Airlines through a private placement in 2019. According to Juneyao Airlines’ 2022 semi-annual report, China Eastern Investment, a subsidiary of China Eastern Airlines Group, is Juneyao Airlines’ second largest shareholder, with a 15% stake.
Thus, China Eastern Airlines and Juneyao Airlines have achieved cross-shareholding between the two parties, which they say will strengthen their positions in Shanghai and eastern China. At the time, they billed it as the largest equity deal in the country’s civil aviation industry, with the airlines investing 13 billion yuan ($1.82 billion) in each other.
China Eastern Airlines is reported to be cooperating with Juneyao Airlines and Juneyao Group in marketing, maintenance, service support and resource sharing.
https://simpleflying.com/juneyao-group-drop-china-eastern-shares/ Juneyao Group will divest half of its shares in China East