Qatar Airways, the Doha-based airline, is set to divest its entire stake in Cathay Pacific Airways, a move that will mark its departure from the Hong Kong airline after an eight-year association. The transaction is estimated to be worth approximately $897 million.
Late on Wednesday, Cathay Pacific reported that Qatar Airways had expressed an interest in offloading its 9.7% stake in the company. In response, Cathay intends to buy back the shares at a rate of HK$10.8374 (or $1.39) per share. This represents a roughly 4% discount to the closing share price prior to the announcement.
Qatar Airways had initially acquired the stake in November 2017 from Kingboard Chemical Holdings, a Hong Kong firm. This investment made it the third-largest shareholder in Cathay Pacific, trailing behind Swire Pacific and Air China.
The investment in Cathay Pacific marked Qatar Airways’ first significant venture into an Asian airline. The move was intended to expand its global footprint and to increase passenger volumes through its Doha hub.
According to Qatar Airways’ CEO, Badr Mohammed Al-Meer, the decision to exit Cathay Pacific aligns with the company’s disciplined investment strategy. This strategy has facilitated a period of strong performance, allowing the company to reassess its investments and plan for long-term growth.
As part of its competitive strategy, the Middle Eastern airline has made a series of investments in airlines around the world. These investments include stakes in IAG, the parent company of British Airways, South American carrier LATAM, and Virgin Australia.
To acquire the stake, Cathay Pacific is set to pay a premium of approximately 35% over the original price paid by Qatar Airways. The Hong Kong airline plans to fund the transaction through its internal resources and existing credit lines.
Patrick Healy, Chairman of Cathay Pacific, indicated that the stake buyback signals the company’s strong confidence in its future. The airline has proposed an ambitious investment plan amounting to HK$100 billion over the next seven years. This plan encompasses fleet renewal, cabin products, and lounge facilities.
Upon completion of the deal, Swire Pacific, the controlling shareholder, will see its stake rise to 47.69%, up from 43.12%. Similarly, Air China’s shareholding will increase to 31.78%, up from 28.74%.
Despite Qatar Airways’ planned exit, both airlines have committed to continuing their partnership via the Oneworld Alliance.
Why has Qatar Airways decided to sell its stake in Cathay Pacific?
The decision aligns with the company’s disciplined investment strategy and follows a period of strong performance, allowing the company to reassess its investment portfolio.
How will Cathay Pacific fund the buyback of the stake?
Cathay Pacific will fund the transaction through its internal resources and existing credit lines.
What impact will the stake sale have on Cathay Pacific’s shareholding structure?
If the deal is approved, controlling shareholder Swire Pacific’s stake in Cathay will rise to 47.69%, while Air China’s shareholding will increase to 31.78%.
