China Eastern Airlines

(CEA) - Get Report

has proposed taking over

Shanghai Airlines

through a share swap,

Dow Jones Newswires

reports, citing a person familiar with the situation.

The deal would finalize the long-anticipated merger between the two struggling state-owned carriers,

Dow Jones

notes. Rumors that China Eastern might merge with Shanghai Airlines or another competitor have been circulating for months.

Under the proposal, China Eastern will raise $1.02 billion via a private placement in both Shanghai and Hong Kong to complete the merger. China Eastern will swap 1.3 of its shares for each Shanghai Airlines share, the person told

Dow Jones


The deal offers a 25% share price premium to Shanghai Airlines shareholders. Regulatory approval for the proposed merger is still pending, the report said.