The exercise will also cost the ground handling and catering arm of Singapore Airlines a one-off restructuring expense of $8.5 million.

Apart from the cost savings, the proposed deal aims to help Sats boost its non-aviation portfolio, the company said in a circular to shareholders on Tuesday.

Sats currently earns almost all its revenue from the aviation business but if it held 100 per cent of SFI, this would be reduced to just 55 per cent, ensuring a more balanced portfolio.

The company announced last month that it had struck a $334.5 million deal for a major stake in SFI ? a food manufacturer and supplier with significant operations overseas, which contribute about 65 per cent of its total turnover.

The firm also supplies food to army camps in Singapore.

Under the proposed sale, Ambrosia Investment - a wholly-owned unit of Temasek Holdings - will sell its 69.68 per cent stake in SFI to Sats.

The sale price: $334.5 million or 93 cents a share, which is a 4.5 per cent premium over SFI's closing price the day before the Dec 2 announcement.

Sats hopes to take a 100 per cent stake in the company by convincing other shareholders to also sell at the same price.

That would take the total purchase price to $509 million - the biggest buy made by the company. Before the deal can go through, Sats, which is 80 per cent owned by SIA needs the green light from its minority shareholders as well.

In the circular, Sats also informed its shareholders that ING Bank N.V (ING) - the financial independent adviser to Sats' independent directors - has recommended that the proposed acquistion is on normal commercial terms and is not prejudicial to the interests of the company and its minority shareholders.

Following this, the company's independent directors have unanimously recommended that minority shareholders vote in favour of the acquistion. Not all are convinced.

Some, such as 37-year-old remisier Ong Chin Woo, believe the 93 cents a share offer by Sats is far too high. Mr Ong, who claims to represent about 100 shareholders holding just under 2 per cent of the total minority stake, feels 60 cents is more reasonable.

According to Sats management, SFI has never traded below 66 cents in the last six years. Shareholders will meet on Jan 20 to vote on the deal.