1. What is a fair value for MAS as a stand-alone firm? A significant strategic shareholding in Malaysia Airlines (MAS) had become available in the market. The flag carrier of Malaysia with a fleet of 85 aircraft traveling to 103 destinations worldwide, the airline was trading at an equity value of US$1,316 million as ofMarch 30, 2010. MAS was led by a strong management team with a proven track record. Over the past few years, the management had undertaken a strategic business transformation, resulting in a significant positive turnaround of performance, including Malaysian ringgit (MYR) 2.3 billion in cost savings from 2006 to 2008 and steady revenue growth from MYR 9 billion in 2006 to MYR 15 billion in 2008.

Etihad Airlines was a Middle Eastern carrier looking to extend its route network beyond its hub in Dubai, and it hoped to gain access to lucrative routes to Singapore, Hong Kong, and Australia. Etihad’s bankers at Standard Chartered advised them to consider a 20 to 25 percent investment stake in MAS, hand in glove with an operating alliance.

Etihad Airways was established as the flag carrier of the United Arab Emirates in July 2003 by royal decree with an initial paid-up capital of United Arab Emirates dirham (AED) 500 million provided by the Abu Dhabi Investment Authority. As of January 2010, the airline operated passenger and cargo services to 85 destinations around the world from its home base in Abu Dhabi.