Shanghai Juneyao Group planned to halve its holdings of China Eastern Airlines by no more than 156 million shares (accounting for 0.826% of the total capital stock of China Eastern Airlines) due to the need for its business plan, according to a stock filing revealed by China Eastern Airlines on September 21st.
Juneyao Group is the parent company of Juneyao Airlines. As early as 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 subscribed 7.3 billion Yuan ($1.02 billion) and Juneyao Airlines 2.5 billion Yuan ($350 million).
Juneyao Group and Juneyao Airlines realize the holding 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 China Eastern Airlines’ top 10 shareholders, with a shareholding ratio of 1.65%. Juneyao Airlines is not among the top 10 shareholders, with a shareholding ratio of 1.23%.
Before the completion of the sell, Juneyao Group is the ninth-largest shareholder in China Eastern Airlines’ top 10 shareholders. Photo: Juneyao Airlines
The planned reduction of Juneyao Group this time accounts for half of its shareholdings of China Eastern Airlines. At the time of writing this article, the share price of China Eastern Airlines was 4.84 Yuan ($0.68), which means the reduction will bring Juneyao Group approximately 760 million Yuan ($106 million).
However, compared with the purchase price, the current price would be a considerable decline, meaning the Juneyao Group chose to sell with a loss.
Reason for the sell
For the reason for the reduction, it is mentioned in the announcement that it’s due to “the need for the Juneyao Group’s business plan.” In other words, the direct purpose of the low sale is to let Juneyao Group obtain available funds and invest in the company’s other business.
Information on the Juneyao Group’s official website shows that Juneyao Group is a modern service industry enterprise focusing 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 A-share listed companies.
The listed company Juneyao Airlines in the air transport sector recorded a net loss of 1.889 billion Yuan ($2.65 billion) in the first half of 2022. Compared with the profit of 102 million Yuan ($14.3 million) in the same period in 2021, a year-on-year plunge of 1,950.18%. On the other hand, the asset-liability ratio increased from 76.97% (end of 2021) to 80.61% now.
Juneyao Airlines experienced a record year-on-year plunge of 1,950.18% for the first half of 2022. Photo: Juneyao Airlines.
In addition, it is recently reported that Juneyao group plans to enter the automotive industry. It has set up a new automotive team after taking over Yundu Auto.
It wasn’t clear now which sectors Juneyao Group would invest the money in.
An early strategic relationship between the China Eastern and Juneyao Airlines
China Eastern Airlines also holds shares in Juneyao Airlines through a private placement in 2019. According to the 2022 semi-annual report of Juneyao Airlines, China Eastern Investment, a subsidiary of China Eastern Airlines Group, is the second-largest shareholder of Juneyao Airlines, with a shareholding of 15%.
Therefore, China Eastern Airlines and Juneyao Airlines achieved a cross-shareholding between the two sides, which they said would strengthen their positions in Shanghai and eastern China. At the time, they heralded it as the biggest share transaction in the country’s civil aviation industry, with the airlines investing a combined 13 billion Yuan ($1.82 billion) in each other.
It is reported that China Eastern Airlines has cooperation with Juneyao Airlines and Juneyao Group regarding marketing, maintenance, service support, and resource sharing.