Reuters: Financial Services and Real Estate: UPDATE 1-Malaysia Airlines, AirAsia halted; share swap may be off

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UPDATE 1-Malaysia Airlines, AirAsia halted; share swap may be off May 2nd 2012, 05:41 Wed May 2, 2012 1:41am EDT (Adds share swap details) By Yantoultra Ngui KUALA LUMPUR May 2 (Reuters) - Shares of Malaysian Airline System Bhd (MAS) and budget carrier AirAsia Bhd were suspended on Wednesday, amid speculation that a proposed $364 million share swap between the companies will be cancelled. Speculation that the deal would collapse has risen in recent weeks as the plan encountered strong resistance from the 20,000-strong MAS union, which voiced concern that the tie-up resembled a takeover by AirAsia founder Tony Fernandes. Under the terms of the deal, Tune Air Sdn Bhd, controlled by Fernandes and his deputy Karmazin Merman, would take a 20.5 percent stake in MAS and two board seats. In exchange, the government's investment arm Khazanah Nasional would have 10 percent of AirAsia. The government holds a majority stake in MAS through Khazanah. The expected cancellation comes as Prime Minister Najib Razak, widely seen as the main driver of last August's share swap deal, comes under pressure from the influential MAS union ahead of national elections that could be held as early as June. Placating the union by scrapping the deal may help Najib wrest back Selangor state, where the national carrier is based, from the opposition during the elections. Even as the two carriers unwind the share swap deal, they would still move ahead with a collaboration agreement covering areas such as aircraft maintenance and joint procurement of jet fuel, a source with direct knowledge of the deal said. Both companies are due to issue announcements to the local stock exchange later on Wednesday. "The announcement may take the form of a general offer for MAS so that AirAsia can sell their shares and use proceeds to buy back shares from Khazanah Nasional," said the source, who declined to be identified ahead of the announcements. A MAS official declined to comment. AirAsia officials were not immediately available to comment. The deal was aimed at helping both carriers compete against rivals like Tiger Airways Holdings Ltd and Singapore Airlines Ltd once the Southeast Asian open-sky policy comes into effect in 2015. Shares of MAS tumbled as much as 3.2 percent on Monday. AirAsia shares have slid 11.7 percent so far this year. (Reporting by Yantoultra Ngui Editing by Ryan Woo) Link this Share this Digg this Email Reprints

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