TNAG-2480-FCO40-3610-Business-matters-in-Hong-Kong-Swire-Group-1992 — Page 27

L

JOHN SWIRE & SONS LTD

Swire House

39 Buckingham Gate

London SWIE 6AJ

Registered Office

Registered Number 133143 ENGLAND

From Sir Adrian Swire

Chairman

Telegrams:

TEMSELOAF LONDON SW1

Telephone:

071-834 7717

Fax: 071-630 0353

Teler: 888800

Answer back:

SWIRE G

The Rt. Hon. Douglas Hurd, CBE, MP,

Secretary of State for Foreign & Commonwealth Affairs,

Foreign & Commonwealth Office,

Downing Street,

LONDON, SW1A 2AL.

Dear

Douglas,

Mh Bunte

gre

Cathay Pacific Airways

15th July, 1992.

MAN

HILD for a chruft SAS regr

yes

Rs law. Goodland PSL Pus

Sri J Goles

Mr. stuu

Spenal Ads

FED

AMA

When we met in February to debate Hong Kong issues, I mentioned that we were holding private discussions with the Chinese, at a senior level, in the expectation that they would be prepared to acquire a 10% holding in Cathay Pacific Airways, on top of the present CITIC holding of 12.5%. This has now been achieved with CNAC (a subsidiary of CAAC) and China Travel Service (CTS) acquiring 5% each at a total cost of some £230 mm. The sellers were the Hongkong & Shanghai Bank, who disposed of their holding very reluctantly at Swire's request and who were most helpful throughout. All of us appreciated that a deal of this kind was in the best interests of Hong Kong and of Cathay Pacific Airways.

We have known for some time that broad approval for this deal had been given by the State Council and by Li Peng. The mechanics, however, mainly because of price considerations, proved exceptionally difficult and delicate. At the end of the day, however, Peking did what they said they would do and I think, against all the current problems on the aviation front (connected with the airport, air service agreements and so on) that this pragmatic move on Peking's part is a very encouraging sign for the future of Hong Kong as a whole. I hope too that it may help to break the ASA separation logjam within the JLG.

The mainland Chinese now have a 22.5% shareholding in Cathay Pacific, with 51.85% in the hands of Swire Pacific, and the remaining shares in public hands. We (Swires) therefore continue to control the airline and to manage it. We are satisfied, certainly for the time being, with this shareholding structure.

The move has been very well received and commented upon throughout Hong Kong; and I thought you might be interested to have this background before your visit at the end of this month.

Cissan

c.c. The Rt. Hon. John MacGregor, OBE, MP, Secretary of State for Transport

Yours

era

Aduan