bocastephen

Selfishly, I do hope that if CX survives, it joins *A - but unfortunately that comes with CA taking a larger stake which isn't in the best interests of anyone in HK, or at CX.

garykung

It is not the matter. The problem is HKSAR Government knows jack about business. Pretty much every business the Government has its hand on is a guarantee screw-up.

I concede that CA is not very much better. FWIW - CA is both the policymaker and an airline. At the minimum, if CA concerns about $$$, at least it will do whatever it takes to save CX and expand its market. Changes will be made and people will disappoint. At least, as an airline and a brand, CX will survive and succeed again (at least eliminating the gambling addict CX has).

I wish I am wrong about this. Is there any success cases that I am not aware of?

ernestnywang

I believe NX is doing alright? Fully owned by CA I believe, but still quite independent operationally.

brunos

All airlines that survive are getting huge bailout packages "coordinated" by the local government.
The SCMP article is short on details but the bailout package seems much much smaller than what Singapore Airline is getting.

CX HK

HKG will only own around 6% of CX when the deal is done and they won't have any say in managerial decisions I believe. So no fears of MTR-style chaos.

889

"The problem is HKSAR Government knows jack about business. Pretty much every business the Government has its hand on is a guarantee screw-up. . . I wish I am wrong about this. Is there any success cases that I am not aware of?"

Up until about 20 years ago, before privatisation of a sort, the MTR was indeed a well-run operation. But yes, it's been downhill ever since. And as Disneyland demonstrated, the Government has zero ability to negotiate a good deal with the private sector. We don't know the details of the Cathay investment, but experience tells us the Government no doubt got shafted.

Looking at the broader implications of this, it probably wipes out the possibility of a new low-cost carrier setting up in HK, not that that was a strong possibility at present,

apsrinomecker

HKEX is partially owned by HK government. I think it is doing fine...

chinatown

No it isnt. SAR Gov't owns 5.93% of HKEX. Its a substantial shareholder, not partially owned. huge diff.

garykung

In this case, a tiny ownership, regardless how small, is too much.

Welcome to FT.

And no - HKEX is not doing fine, at least contrary to what you think.

1. LSE cited explicitly that the HKSAR Government's ownership was one of the reasons refusing the M&A proposal.

2. HKEX changed its rule to allow WVR and accommdated Alibaba returning (Note - WVR is not necessarily a bad thing. But it was clear that HKEX would bend the rules for certain companies).

garykung

Okay - here is the official detail:

- CX will issue HK$19.5 billion in preference shares with detachable warrants to the HKSAR Government after requisite shareholders’ approval has been obtained.

- CX will launch a HK$11.7 billion rights issue of shares to existing shareholders after requisite shareholders’ approval has been obtained

- The HKSAR Government will provide a HK$7.8 billion bridge loan facility to CX, available for drawdown immediately.

While shareholders’ approval is required, given the ownership for both Swire and CA exceeds 50%, the plan is going forward regardless as soon both are aboard.

Welcome CX, a new addition of SOE and the beginning of the end...

Nicc HK

HKEx is one of the most inept companies I have ever come across, and I have worked with exchanges from the biggest to the smallest.

All they have had to do until 2019 was nothing (which they are exceptionally good at) and let the money roll in thanks to a booming market (which they did not create, just the lucky place where people trade) becoming the no 3 exchange globally by market capitalisation.

Unimaginative management with a one word strategy 'China'. Even the LME takeover and LSE aborted takeover, were 2 examples of disconnected thought processes that had everything to do with China.

And yes HKEx 'operates' with the mentality of a government department.

Back to CX, good for them, lets hope good for the taxpayer footing the bill. It will be interesting to see the shareholding structure after the deal, and any mention of QR.

Stay Safe!
Nicc HK

sxc

Please keep this discussion relevant to Cathay.

sxc
Cathay Pacific Moderator

cx4ever

According to SCMP the new shareholding structure is: 42.26% Swire, 28.17% CA, 9.38% QR, 6.08% HK Govt.

triplefives

If what SCMP is reporting is correct and HKD 19.5B = 6.08% of Cathay, that would value the entire company at HKD 320B which is almost 10x the market cap using the last closing price!

They might as well have bought out HX as well.

fallinasleep

The HKD 19.5bn is for preferred shares, which is not included in the market cap calculation.

With the HKSAR taking a 6% stake, the free float drops to 15%. Qatar is basically sitting on 9% that it cannot do anything with (guess they should be thankful the value of their stake did not go to zero!).