Slaughter and May has advised Swire Pacific and Cathay Pacific Airways on the restructuring of the shareholdings in Cathay and Hong Kong Dragon Airlines and Cathay's subscription for additional H shares in Air China.

Hong Kong-based partners St John Flaherty and Colin Smith led the Slaughters team on the deal, which involved a conditional agreement by Air China, Cathay, China National Aviation, CITIC Pacific and Swire for the restructuring of the parties' shareholdings in Cathay and Dragon Air and the subscription by Cathay for additional H shares in Air China.

If the 8 June agreement becomes unconditional, Dragon Air will become a wholly owned subsidiary of Cathay, Air China will become a substantial shareholder of Cathay, while Cathay will increase its shareholding in Air China.

Cathay will pay US$1.05bn in shares and cash for the acquisition of shares in Dragon Air, and US$522m in cash for the subscription for H shares in Air China.