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Asiana Airlines

HDC-Mirae Asset consortium takes majority in Asiana Airlines for $2.2 bn

Dec 29, 2019 (Gmt+09:00)


A consortium of Hyundai Development Company (HDC) and Mirae Asset Daewoo Co. Ltd. has agreed to take a 76.5% stake in Asiana Airlines Inc. for 2.5 trillion won ($2.2 billion), with Mirae Asset reportedly planning to set up an aircraft leasing company early next year.

They signed a share purchase agreement on Dec. 27 with Kumho Industrial Co. Ltd. and Asiana to buy Kumho’s entire stake of 31% in the South Korean carrier and issue new shares of the airline to beef up its capital base, according to the companies’ announcement.

Under the agreement, HDC will acquire 61.5% of Asiana for 2.01 trillion won, with Mirae Asset taking 15.0% for 490 billion won.

The acquisition cost is split into 2.18 trillion won rights offering for Asiana and 322.8 billion won for the existing shares owned by Kumho Industrial.

The per-share price of 4,700 won for the existing Asiana shares represents a 13% discount to its closing price of 5,430 won on Dec. 27, reflecting contingent liabilities for a penalty Asiana may face in relation to in-flight catering service.

The share purchase is expected to help Mirae Asset accelerate its push into the aviation financing business by securing $3.6 billion of finance and operating lease of Asiana, in addition to synergy effects for the brokerage firm’s global hotel portfolio.

Asiana pays 550 billion won per year in lease fees for 82 airplanes to foreign leasing companies.




Mirae Asset is likely to set up an aircraft leasing firm in Singapore in the first quarter of 2020, the Maeil Business Newspaper reported on Dec. 19.

FUNDING PLANS

With the acquisition, HDC is aiming to become a mobility service company beyond construction and retail businesses.

HDC plans to raise 500 billion won by selling new shares to its existing shareholders in March 2020 to fund the deal, according to investment banking sources.

Additionally, it is reportedly seeking to raise 300 billion won by issuing exchangeable bonds backed by Asiana. It may draw another 400 billion won from other pan-Hyundai companies in exchange for part of Asiana shares, in addition to giving exclusive business rights on aviation fuel, duty-free stores and in-flight  catering services of Asiana.

The HDC-Mirae consortium is required to buy additional shares in Asiana's six subsidiaries, included in the package, to take full ownership within the next two years in accordance with the fair trade act. Otherwise, they need to dispose of them.

The subsidiaries include two domestic budget carriers.

An HDC source said that the company would take a look at the issues regarding the subsidiaries, upon completion of the Asiana acquisition by April 2020.

Asiana’s debt-to-equity ratio reached 807.6% on a consolidated basis as of the end of September, with 6 trillion won in borrowings.

HDC shares have lost 14% in a month since its consortium was picked as a preferred buyer of Asiana on Nov. 12.

Write to Minki Koo and Jinsung Kim at kook@hankyung.com



(Photo: Getty Images Bank)

Yeonhee Kim edited this article

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