Lyon: Cathay Pacific Airways (00293) repurchasing Qatar Airways' shares is negative news.

Lyon released a research report stating that it gives CATHAY PAC AIR (00293) a "hold" rating. Cathay Pacific announced that, in accordance with a commitment agreement, it will repurchase all of Qatar Airways' 9.57% stake (a total of 643,076,181 shares) at a repurchase price of HK$10.8374 per share. This repurchase price represents a 3% discount to the 5-day volume-weighted average price and implies a total cost of approximately HK$6.97 billion. After the transaction is completed, the public shareholding of CATHAY PAC AIR will decrease to approximately 20.53%. The announcement stated that the repurchased shares will be held as treasury stock. The Lyon report indicates that, in the view of the bank, this announcement seems to be net negative. Although CATHAY PAC AIR repurchased shares at a 4% discount to the last closing price, there is currently no indication that the repurchased shares will be cancelled (the announcement only mentions that they will be held as treasury stock). However, the exemption from the Hong Kong Stock Exchange's requirements for public shareholding (minimum of 25%) should alleviate concerns in the market about potential equity financing in the future.