Cathay Pacific Airways and Hong Kong Dragon Airlines Limited

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Cathay Pacific Airways and Hong Kong Dragon
Airlines Limited
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Cathay Pacific Airways

• Established in 1946
• International airline registered and based in
  Hong Kong
• Offering scheduled cargo and passenger services
  to 92 destinations
• Number of employees over 23,000 (including its
  subsidiaries and associates)
• Principal shareholder Swire Pacific
• Shareholder in AHK Air Hong Kong Limited (an all
  cargo carrier), Hong Kong Dragon Airlines Limited
  and Air China Limited

Source Annual reports of Cathay Pacific
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Ownership structure of Cathay Pacific (before
the agreement)
Source HKEx
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Financial Information of Cathay Pacific
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Hong Kong Dragon Airlines Limited (Dragonair)

• Established in 1985
• Operating passenger and all-cargo services
• Fly to 23 cities in the Mainland (more than any
  other non-Mainland airline, over 300 fights a
  week)
• Launched dedicated freighter services to Europe
  and Middle Ease in 2000
• Number of staff 3,813 (as of 31 May 2006)
• Part-owned and managed by Cathay Pacific between
  1990 and 1996

Source www.dragonair.com
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Ownership structure of Dragonair (before the
agreement)
Source HKEx
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Financial Information of Dragonair
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Ownership Structure of Cathay Pacific, Dragonair,
and Air China (before the agreement)
Source HKEx
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The Agreement

• Announced on 8 June 2006
• Dragonair will become a wholly owned subsidiary
  of Cathay Pacific
• Air China will become a substantial shareholder
  of Cathay Pacific
• Cathay Pacific will increase its shareholding in
  Air China to 20

Source HKEx
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The Agreement

• Dargonair will become a wholly owned subsidiary
  of Cathay Pacific
• Cathay Pacific has offered to acquire the
  remaining 82.12 shareholding in Dragonair that
  it does not already own for HK8.22 billion,
  turning it is not a wholly owned subsidiary

Source HKEx
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The Agreement

• Dargonair will become a wholly owned subsidiary
  of Cathay Pacific
• The consideration for the Dragonair shares will
  be a combination of the issue of 548,045,724
  (16.20 of the existing Cathay Share Capital) new
  Cathay Pacific shares at HK13.50 each and
  HK0.82 billion in cash
• The issue price represents a 4.2 premium to the
  closing price of Cathay Pacific of the Cathy
  Shares of HK12.95 on 2 June 2006

Source HKEx
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The Agreement

• Air China will become a substantial shareholder
  of Cathay Pacific
• Air China will acquire Cathay Pacific shares from
  Swire Pacific (40,128,292 shares) and CITIC
  Pacific (359,170,636 shares) at HK13.50 each.
• ? Air China will become shareholder of Cathay
  Pacific with a 10.16 equity interest for a total
  consideration of HK5.39 billion.
• ? Air China and its subsidiary CNAC Limited will
  own an aggregate 17.5 of Cathay Pacific

Source HKEx
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The Agreement

• Air China will become a substantial shareholder
  of Cathay Pacific
• Both Swire and CITIC have also undertaken to
  further reduce their respective shareholding in
  Cathay Pacific to 40 and 17.5 within 12 months
  of the completion of the agreement by selling
  Cathay Pacific shares in the open market

Source HKEx
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The Agreement

• Cathay Pacific will increase its shareholding in
  Air China to 20
• Cathay Pacific has agreed to subscribe in cash
  for 1,179,151,364 Air China H shares at HK3.45
  per each Air China H share, increasing its
  shareholding in Air China to 20 from 10 at a
  total cost of HK4.07 billion (HK3.45 per share)
• The acquisition price of HK3.45 per Air China
  share represents a 15.8 premium to the Air
  Chinas IPO price and a 11.3 premium to the
  closing share price on 2 June 2006

Source HKEx
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The Agreement

• Cathay Pacific will increase its shareholding in
  Air China to 20
• Reflecting its confidence in the benefits and
  synergies from acquiring Dragonair, Cathay
  Pacific has agreed to pay a special dividend of
  HK0.32 per share upon completion of the
  transaction

Source HKEx
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Benefits

• Enable Cathay Pacific to connect its
  international network with Dragonairs short-haul
  services to Mainland China and secondary regional
  destinations
• Produce efficiencies and operational streamlining
• Reinforce Hong Kongs position as the premier
  aviation hub
• Further the development of Beijing Capital
  International Airport and Hong Kong International
  Airport as gateways to and hubs for Mainland
  China
• Deliver more jobs and career opportunities

Source HKEx
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Acquisition of Dragonair Shares by Cathay Pacific
Source HKEx
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Acquisition of Cathay Pacific Shares by Air China
Source HKEx
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After the change in shareholder structure

• Swire will remain the principal, long-term
  shareholders in Cathay Pacific
• Dragonair will continue to operate under its own
  brand, but under the Cathay Pacific management
• Cathay Pacific and Air China will continue to
  develop closer cooperation, such as establishing
  an air cargo joint venture in Shanghai

Source HKEx
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Ownership structure of Cathay Pacific (after the
agreement)
Source HKEx
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Ownership structure of Cathay Pacific (after the
agreement)
Source HKEx
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Stock Price of Cathay Pacific