Mirae Asset teams up with builder for $1.2 bn Asiana Airlines deal

Mirae Asset Daewoo Co. Ltd. has attracted Hyundai Development Company (HDC) as a strategic partner to bid for a controlling stake in debt-ridden Asiana Airlines Inc., a transaction worth an estimated 1.5 trillion won ($1.2 billion).

The Mirae-HDC consortium is one of six bidders for the No.2 carrier in South Korae by the Sept. 3 deadline of non-binding bids, according to financial regulatory and creditor sources.

Other bidders include consumer product maker Aekyung Group and activist fund Korea Corporate Governance Improvement (KCGI), but large conglomerates such as SK, Lotte, Hanwha, GS, Shinsegae and CJ have not submitted bids, the sources confirmed.

The preliminary bidders consist of only South Korean companies or funds because foreign capital is practically banned from taking a controlling interest in a domestic air carrier.

Asiana Airlines’ No. 1 shareholder Kumho Industrial Co. Ltd. put its entire 31.05% stake in the airline on the market because of the latter’s financial difficulty.

A potential buyer is required to buy new shares to be issued by Asiana Airlines and its six subsidiaries, including two low-cost carriers, in a package deal.

Their combined value is estimated at 1.5 trillion won, considering a management rights premium and the market value of the 31% stake at 378 billion won.

The bidding prices of six contenders were not disclosed, nor the three other bidders.

Kumho Industrial plans to complete the stake sale by the end of this year, managed by Credit Suisse.

LEAD ROLE IN CONSORTIUM

Mirae Asset Daewoo is not allowed to have a direct control over Asiana Airlines under the laws separating industrial and financial capital. But it can participate as a financial investor.

After deciding to join the race, the brokerage house approached major Korean companies to find a strategic partner and took a lead role in forming the consortium.

At a recent staff meeting, Mirae Asset founder and chairman Hyeon-joo Park called for “taking a close look at the bidding process with interest,” according to a financial industry source.

“Chairman Park used to have a somewhat negative view about the airline industry. But he sees great room for improvement of Asiana Airlines,” a Mirae Asset Daewoo source told the Korean investors.

“He thoroughly studied how large US airlines were able to post high profit margins despite intensely competing with low-cost carriers and if our airlines can do so,” he added.

For HDC, a possible acquisition of a control over Asiana Airlines would bolster its duty-free store business. Relationships with Hyundai Motor Group and Hyundai heavy Industries Co. Ltd., which originate from the late founder Chung Ju-yung, are also expected to support the airline business.

Among other bidders, Aekyung Group runs the country’s largest budget carrier Jeju Air which it set up in 2005. KCGI is the No. 2 shareholder of Hanjin KAL, the parent firm of flag carrier Korean Air Lines Co. Ltd.

Both Korean Air and Asiana swung to operating losses in the first half of this year compared with a year-earlier period.

Asiana Airlines, with assets of 11 trillion won, had a debt-to-capital ratio of 649% at the end of last year on a consolidated basis.

Two state-run lenders Korea Development Bank and Export-Import Bank of Korea own a combined 23.01% in Asiana Airlines as of late June 2019, after converting bonds into equity.

By Jaehu Kim and Sang-eun Lucia Lee

hu@hankyung.com



(Photo: Getty Images Bank)