Sono Hospitality heralds proxy fight to control T’way Air

Sono Hospitality Group, South Korea’s top resort operator, has vowed to more actively horn in on the business of T'way Air Co., portending a proxy battle over management control of the country’s low-cost carrier (LLC) between the latter’s two largest shareholders.

On Wednesday, Sono International Co., the hospitality giant’s holding company, announced it will officially take part in T'way Air's management.

The announcement came two days after Sono International sent a letter to T’way Air demanding a change of the budget airline’s entire board of directors and a rights offering to ensure the airline’s stable operation.

The Korean hospitality company, T'way Air's No. 2 shareholder, criticized the airline for ravaging the T’way brand after the LLC was slapped with a series of fines and correctional orders for poor operation.

Sono International plans to send a shareholder proposal to T’way Air before the latter’s general shareholders meeting in March to recommend new directors who will devise a new business strategy to improve the budget carrier’s operation and financial health.

Following the announcement, T’way Air shares ended up 1.2% at 3,400 won on Wednesday while shares of T'way Holdings Inc., its holding firm, jumped 18.4% to close at 1,204 won ($0.84). 

TO ENHANCE T’WAY AIR’S OPERATION AND SHAREHOLDER VALUE

The Korean resort giant expected its hands-on involvement in T’way Air’s management would foster the LLC’s growth and reinforce shareholder value.

Sono Hospitality Group commands the second-largest share in T'way Air of 26.77% — Sono International with 16.77% and Daemyung Sonoseason Co. with 10%.

The budget airline’s largest shareholders are T'way Holdings and YeaRimDang Publishing Co. They jointly own a 30.06% stake as of last week.

Due to a mere 3-percentage-point gap between T’way Air’s No. 1 and No. 2 shareholders’ holdings, speculation has been rife that the hospitality company would attempt to take over the budget carrier.

Last year, when Sono International acquired T’way Air's stakes from Seoul-based private equity firm JKL Partners, Sono said it would not seek to control the airline’s management.

The latest move, however, suggests the hospitality group has pivoted from its earlier stance.

AVIATION AS A NEW GROWTH ENGINE

“We will maximize customer satisfaction with T’way Air and improve its shareholder value by leveraging Daemyung Sono Group’s extensive infrastructure at home and abroad,” the group’s Chairman Seo Jun-hyuk said on Wednesday.

“Daemyung Sono Group will strive to leap to become a global player by taking advantage of its venture into the aviation industry, the group’s new growth driver.”

Daemyung Sono Group is the former name of Sono Hospitality Group.

Last October, the group purchased an 11% stake in another Korean LLC, Air Premia Inc., from Seoul-based PE firm JC Partners for 47.2 billion won ($33 million), along with a call option to buy an additional 11% stake in the budget carrier by the end of June 2025.

It also has been aggressively acquiring hotels and resorts overseas.

In early 2024, Sono Hospitality acquired Hotel Dame Des Arts in Saint Germain-des-Prés, Paris, and a 100% stake in Hawaii-based Waikiki Resort Hotel Inc. from Hanjin KAL Corp. in April.

Between 2022 and 2023, Sono International purchased The Normandy Hotel in Washington, D.C., and the 33 Hotel New York City Seaport.

Late last year, its holding firm Sono International embarked on a process to go public on Korea’s main bourse Kospi in the first half of this year.

This is its second initial public offering attempt after folding its earlier IPO plan in 2019 in the aftermath of the COVID-19 pandemic.

Write to Han-Gyeol Seon at always@hankyung.com
Sookyung Seo edited this article.