A consortium of HDC Hyundai Development Company and Mirae Asset Daewoo was picked as the preferred bidder to acquire South Korea’s second-largest air carrier Asiana Airlines on Tuesday.
The decision comes seven months after Asiana Airlines’ parent company Kumho Industrial put a controlling 31 per cent stake in its air carrier unit up for sale. Three bidders – Aekyung Group, Hyundai Development Company and Korea Corporate Governance Improvement (KCGI) – had submitted applications.
“We feel heavy responsibility after being designated as a preferred bidder. We believed acquisition of Asiana fits HDC Group’s sustainable business growth strategy and we will support Asiana Airlines to have the best competitiveness and the highest-level financial solidity,” HDC Group chairman Chung Mong-gyu told reporters at its Yongsan headquarters on Tuesday.
He said the group’s plan to inject some two trillion won ($1.7 billion) of new shares in the air carrier will improve its financial solidity.
“The aviation industry is going through a tough time, and it is a competitive industry. When we inject the new shares by two trillion won, the air carrier’s debt percentage will fall below the 300 per cent level, which is not bad,” Chung said, adding that the acquisition will turn the air carrier’s “vicious financial cycle” into a “virtuous cycle”.
As of the end of the first half of this year, Asiana’s total debt stood at 9.6 trillion won. Many market insiders have questioned the company’s funding power, as the air carrier’s huge debt and unstable cash flow may be difficult for HDC to shoulder alone.
Chung said that once HDC acquires Asiana, it will make safety the priority, whereas expansion of its business will offer more jobs to the people, instead of business restructuring or manpower adjustment.
“Acquisition of Asiana will be a step forward for us to become a mobility group,” he said, adding its aviation business will synergise with its other units, giving an example of in-flight duty-free service.
He also ruled out the possibility of immediate acquisition of Asiana’s budget airline brands Air Seoul and Air Busan, saying that such a decision requires more strategic measures.
As for the name of Asiana Airlines, Chung said the name will not be changed for now as Asiana has built good brand value.
Creditors of Asiana Airlines also welcomed Tuesday’s announcement, calling it a “favourable step” for the business normalisation of Asiana Airlines.
The Korea Development Bank- (KDB-) led creditors have been requesting a “competent” buyer to acquire the Asiana stake and to purchase new shares to be issued by the airline, the state-run KDB said.
In a preliminary bid, the HDC consortium reportedly suggested around 2.5 trillion won for the acquisition. That was about one trillion won higher than the bid suggested by Aekyung Group and the KCGI consortium.
Through the process, HDC and Aekyung received evaluation and approval by the Transport Ministry as their capability to serve as the largest shareholder of the aviation and transport business. KCGI did not apply for the ministry evaluation.
THE KOREA HERALD/ASIA NEWS NETWORK
