Mirae Asset consortium likely to clinch $2.1 bn Asiana Airlines deal

A consortium of Mirae Asset Daewoo Co. Ltd. and Hyundai Development Company (HDC) is set to be announced as a preferred buyer of a controlling stake in Asiana Airlines Inc. on Nov 12, as its bid price of 2.4 trillion won ($2.1 billion) far surpassed offers from two rival bidders, according to regulatory and industry sources.

The bid for a 31% stake in the South Korean carrier and its six subsidiaries is more than 1.5 times higher than the estimated 1.5 trillion won. It includes the premium of management rights and the stake’s market value of 400 billion won.

The Mirae Asset consortium also gained the upper hand over the two other final bidders in financial improvement plans for the airline.

In detail, the Mirae Asset-HDC group offered around 300 billion won to buy the 31% stake in Asiana from Kumho Industrial Co. Ltd., the airline’s largest shareholder, and an additional 2.1 trillion won for new shares to be issued by Asiana.

In comparison, a consortium led by retail- to airline-conglomerate Aekyung Group submitted a bid of less than 2 trillion won by the Nov. 7 deadline, according to one of the sources.

Details about the third bidding group, composed of Korean financial investors, were not immediately available.

“Our bid price is focused on the future, not the past,” a source of the Mirae Asset-HDC consortium told the Korean Investors on Nov. 8. “A large-scale rights offering, if executed, will make Asiana Airlines’ financial conditions stronger than Korean Air.”

In the auction, a potential buyer was required to buy new shares in Asiana for at least 800 billion won.

NO M&A FINANCING

The Mirae Asset-HDC consortium has said that it would not raise debt to finance the possible acquisition.

Mirae Asset will take charge of 20% of the acquisition price, with HDC assuming the remaining 80%.

“They may be able to borrow on shares in Asiana Airlines, or sell corporate bonds. M&A financing will push higher Asiana’s debt-to-equity ratio which is already over 600%,” said another source.

HDC has 1.2 trillion won in cash and cashable assets as of the end of 2018.

Mirae Asset’s equity capital swelled to 9 trillion won by the end of September, the largest amount among Korean brokerage companies.

The aggressive bid by the Mirae Asset consortium reflects high expectations for synergy effects to be created from a control over Asiana Airlines and its earnings after financial improvement.

“They may provide pan-Hyundai family support to Asiana Airlines. For example, it may buy air fuel from Hyundai Oilbank at a low price and Hyundai Motor Group’s companies can mainly use Asiana Airlines for business trips,” said another financial industry source.

For HDC and Mirae Asset, the airline business is likely to give boost to HDC’s duty-free store business and Mirae’s overseas hotel portfolios.

The market rumors about the winning bid by the Mirae Asset-HDC consortium sent Asiana Airlines’ shares more than 20% higher on Nov. 8, before closing up 9.6% at 5,820 won.

In contrast, HDC shares slid 7.3% to 31,050 won on worries about the financial burden from the possible acquisition.

Asiana’s net losses widened to 291.6 billion won in the first half of this year from 43.3 billion won a year earlier.

Write to Sang Eun Lee and Minki Koo at selee@hankyung.com


(Updated the first paragraph on Nov. 11 to say that the announcement is set for Nov. 12.)