Aekyung, 2 others submit final bids for Asiana Airlines

November 7, 2019

A consortium led by cosmetics-to-airline conglomerate Aekyung Group and two other consortia have submitted final bids for Asiana Airlines Inc., the companies said Thursday.

The Aekyung-Stone Bridge Capital consortium, the consortium of Hyundai Development Co. (HDC) and Mirae Asset Daewoo and the consortium of the Korea Corporate Governance Improvement (KCGI) and BankerStreet private equity funds have submitted their final bids to Credit Suisse, the sole lead manager of the deal, the consortia’s leading firms told Yonhap News Agency.

Among the bidders, Aekyung has been the most aggressive, stressing it is the only strategic investor that has 13 years of experience and know-how in operating an airline.

“There is no precedent in which a company that does not have experience of operating an airline has succeeded in airline acquisition. As Aekyung has Jeju Air Co. under its wing, its acquisition of Asiana Airlines is in line with global M&A trends,” Aekyung said in a statement released right after it submitted a final bid.

Jeju Air is the country’s biggest low-cost carrier. AK Holdings, the holding firm of Aekyung Group, owns a 56.9 percent stake in Jeju Air.

HDC said it is awaiting a “wise decision” from the lead manager and hopes the process of selling Asiana will be carried out in a fair and transparent manner under any circumstances.

HDC expects the acquisition of Asiana Airlines will help it diversify its portfolio, which currently ranges from construction, hotel to duty free shop businesses.

Aekyung and HDC reportedly presented the acquisition prices of around 1.5 trillion won and about 2.5 trillion won, respectively, for the country’s second-biggest airline after Korean Air Lines Co.

On Thursday, shares in Asiana Airlines plunged 5.2 percent to 5,310 won, far underperforming the broader KOSPI’s 0.01 percent gain. In contrast, Jeju Air rose 1.4 percent to 25,450 won.

“Investors sold Asiana shares on profit-taking after recent gains as there seems to be no fresh bidder except for the three consortia already known to the market,” Mirae Asset Daewoo analyst Park Hee-chul said over the phone.

In the initial auction held in September, Aekyung, the HDC-Mirae consortium, KCGI and Stone Bridge Capital made it onto the shortlist. Last month, Aekyung and Stone Bridge formed a consortium, and KCGI joined hands with the BankerStreet private equity fund.

The Aekyung-led and HDC-led consortia are likely to be the main competitors to acquire a 31 percent Asiana stake, certain new shares to be issued and the airline’s six affiliates in a package deal, industry people said.

If the KCGI-BankerStreet consortium comes up with a strategic investor such as SK Group or GS Group, it will emerge as third powerful candidate in terms of capital position, they said.

KCGI declined to comment on whether any strategic investor has participated in its consortium.

Kumho Asiana Group, the parent of Asiana Airlines, aims to sell the stake in the airline held by its subsidiary, Kumho Industrial Co., together with its six affiliates as part of its broad restructuring efforts.

The six affiliates include two budget carriers — Air Seoul Inc., which is wholly owned by Asiana Airlines, and Air Busan, which is 46 percent owned by the airline.

The 31 percent stake was valued at 365 billion won (US$315 million) at Thursday’s closing price of 5,310 won. But analysts estimate the deal could fetch up to 2 trillion won when the management premium and the value of new shares to be issued are taken into account.

Kumho Asiana aims to complete the sale of the airline unit this year. It is expected to select a preferred bidder in about a week.

In 2018, Asiana Airlines and its main creditor, the state-run Korea Development Bank, signed a deal that required the carrier to secure liquidity through sales of assets and other means.

In the January-June period, the airline’s net losses widened to 292 billion won from 43 billion won a year earlier due to the won’s weakness against the dollar. A weak won not only drives up the value of dollar-denominated debts when converted into the local currency but also increases purchasing costs.

Asiana Airlines owed financial institutions a total of 2.7 trillion won as of the end of June, with 500 billion won of loans due to mature by the end of December.

Asiana Airlines is scheduled to release its January-September earnings results on Nov. 14.