How much does it cost to buy a low cost airline in Hong Kong? Around $628 million, if you are Cathay Pacific.

Cathay Pacific and HK Express signed a share purchase agreement on March 27, 2019. As per it, Cathay would acquire 100% of the low cost carrier. However, terms and conditions apply.

The value of the deal is estimated to be around $628 million (HK$4.93 billion), however, only around half of this sum ‒ approximately $286 million (HK$2.25 billion) ‒ would be payable in cash.

To seal the deal, HK Express has to obtain consent under relative contracts and to cut off some agreements with third parties. The deal must also  be approved by competition authorities.

The last year has not been the most financially successful for HK Express, according to Cathay Pacific. Last year (ended on December 31, 2018), it reported $17 million (HK$141 million) in losses, in contrast to approximately $7 million (HK$60 million) profit the year before. Meanwhile, Cathay Pacific had an opposite situation. In 2017, it lost $160 million (HK$1.25 billion), but made $298 million (HK$2.3 billion) profit in 2018.

This is not the first time Cathay Pacific is buying into other Hong Kong airlines. In 1994, it bought 75% shares of cargo airline Air Hong Kong, upgrading its stake to a 100% in 2002.

In 1990, together with two other investors, Cathay Pacific bought into its first local competitor in 40 years, Dragonair. In 2006, Cathay Pacific increased its stake to a 100%, rebranding its now wholly owned subsidiary as Cathay Dragon in 2016.

HK Express is partly owned by the debt-ridden HNA Group conglomerate. In December 2018, speculation emerged that the group was looking to sell (some of its) stakes in Hong Kong Express and Hong Kong Airlines.