China Eastern has described an offer by Air China's state-owned parent company to buy a 30% stake in it as incomplete and lacking legal validity.
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Air China's shares fell by as much as 11.9% in Hong Kong.
The offer came 10 days after China Eastern shareholders rejected Singapore Airline's attempt to buy a 24% stake.
CNAC already owns 3.9% of China Eastern and was one of the key voices against the Singapore deal, which it said undervalued the company at 3.80 Hong Kong dollars (25 pence) a share.
CNAC has offered to pay not less than five Hong Kong dollars a share.
Higher offer
China Eastern's parent company said that the proposal was not valid because it was contained in a letter that did not appear to have the endorsement of the company's directors.
Singapore Airlines has not said whether it will make a higher offer for the shares, although China Eastern is still keen to benefit from its expertise.
The Singapore Airlines deal would have been bad news for Air China, because it would have given the world's most profitable airline greater access to China.
China's aviation sector is currently dominated by Air China, China Eastern and China Southern, all of which are state-owned but also have some private shareholders.
(BBC)
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