By intern reporter Zhuang Ying  

Directors for China's third largest airline, China Eastern, have approved a new stock structure that sets the stage for a plan to sell up to 25 percent of the company to Singapore Airlines. 

The proposed restructuring calls for issuing 2.98 billion new shares, boosting the current market capitalization of China Eastern by about 60 percent. 

Moreover, China Eastern Airline Group, parent of China Eastern Airline Corp. Ltd. (HK 0670 and SH 600115), would maintain its control of the carrier by buying 1.1 billion shares for about HK＄ 4.18 billion. 

Singapore Airlines is also preparing for the deal. To meet Singapore Stock Exchange rules, the airline plans to pay HK＄ 4.7 billion for 1.24 billion Class H shares in China Eastern, while the Singapore government's investment arm Temasak Holdings plans to buy an 8.2 percent stake for HK＄ 6.4 billion. 

In the end, Singapore Airlines could wind up with less than the 25 percent stake in China Eastern initially proposed when investment negotiations were announced last month. A one-fourth stake would be the maximum allowed by the Chinese government, which limits foreign ownership in its airlines. 

If Singapore Airlines would pay about HK＄ 7.9 billion in cash for 25 percent of China Eastern, as some analysts had initially estimated, the deal would be subject to disclosure rules set by the stock exchange in Singapore. The exchange requires the airline and other listed companies to disclose details of mergers and acquisitions involving as much as 5 percent of their stock capital. 

A source told Caijing that China Eastern and Singapore Airlines would not follow the stakeholder model crafted in a previous deal by state-owned Air China and Hong Kong's Cathay Pacific Airlines, in which each airline now controls a 17.5 percent stake in the other. 

Terms of the China Eastern deal have not been disclosed. The proposal is now being reviewed by directors for each side, who would later have to seek approval from shareholders as well as two, Chinese government agencies – the State Administration of State Assets Commission and China Securities Regulatory Commission. 

However, the plan has received preliminary go-ahead from Chinese regulators.