(Reuters) -Cathay Pacific Airways said on Wednesday it will repurchase a 9.57% stake from state-owned Qatar Airways for HK$6.97 billion ($897.33 million), after the Middle Eastern airline expressed intentions to exit Hong Kong’s flag carrier.
Cathay will buy the shares at HK$10.8374 each — roughly a 4% discount to its last close — in a deal that would strengthen earnings per share while keeping it sufficiently funded for operations and future investments.
It also provides Qatar a clean, controlled exit, avoiding the market volatility that could arise from an open-market selldown.
Qatar announced it would buy into Cathay in 2017, setting aside HK$5.16 billion for its 9.61% stake-buy.
Hong Kong’s Kingboard Chemical had agreed to sell 378.2 million shares in Cathay to Qatar at HK$13.65 apiece. Cathay’s share repurchase price is at a discount of 20.6% to Qatar’s purchase price from 2017.
At the time, the move was the first ever investment by Qatar Airways in an East Asian airline, allowing it to boost its global influence and potentially increase traffic through its Doha hub. Qatar is the third largest shareholder in Cathay.
Patrick Healy, Cathay’s group chair, said in a separate media statement, “We are firmly focused on sustainably growing our business to strengthen Hong Kong’s status as a world-class aviation hub.”
Qatar Airways CEO Badr Mohammed Al-Meer said the exit reflects its disciplined portfolio strategy and follows a period of strong results, allowing it to optimise investments and position the group for long-term growth.
Qatar had bought the stake in Cathay as part of its strategy to take holdings in other carriers such as IAG.
Cathay, in the filing on Wednesday, said Qatar had approached the firm and expressed intentions to divest its entire stake. The Middle Eastern company owns 643.1 million shares in the flag carrier.
Swire Pacific and Air China together hold a near 72% stake in Cathay Pacific, the filing on Wednesday showed. After completion of the buyback, Swire will have 47.69% holding in Cathay while Air China’s stake will rise to 31.78%.
($1 = 7.7675 Hong Kong dollars)
(Reporting by Rishav Chatterjee and Sherin Sunny in Bengaluru; Editing by Shreya Biswas)
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