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American Airlines Group Inc., the world’s largest carrier, is in advanced talks to acquire a stake in China Southern Airlines Co., according to people familiar with the matter.
The negotiations focus on an investment of about $200 million by Fort Worth, Texas-based American in China Southern’s Hong Kong-listed shares, said the people, asking not to be identified as talks are confidential. The sale will likely take place via a private placement, one of the people said. China Southern has a market value of about $10 billion.
Under the discussions, American would nominate to the Chinese company’s board an observer — a representative without voting rights, the people said. Details of a deal are subject to change and a transaction could still fall through.
China Southern representatives couldn’t immediately comment when reached after regular business hours. A spokesman for American Airlines declined to comment.
An investment in China Southern would allow American to strengthen its presence in a market that the International Air Transport Association predicts will surpass the U.S. to become the world’s biggest in terms of passenger numbers by 2024. Delta Air Lines Inc. acquired a minority stake in China Eastern Airlines Corp. in 2015.
A sale of a stake in China Southern would represent the Chinese government’s efforts to diversify ownership of state-controlled enterprises. Authorities have urged firms in industries including power, energy, defense and aviation to take measures this year to broaden ownership.
China Southern is the last of the nation’s top three airlines to bring in a non-mainland Chinese strategic investor. Cathay Pacific Airways Ltd. owns about 18 percent of flagship Air China Ltd. Besides Delta, Shanghai-based China Eastern also counts online travel services provider Ctrip.com International Ltd. among its shareholders.
American connects 350 destinations in 50 countries, mostly in North America, the Caribbean, South America and Europe. It has flights from major U.S. cities to Beijing and Shanghai. China Southern — with a fleet of 684 aircraft as of June 2016, the largest in Asia — flies to 208 destinations across 40 countries and has been expanding on routes to Australia, New Zealand and Southeast Asia.
–With assistance from Mary Schlangenstein
©2017 Bloomberg L.P.