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Airline acquisition

Parent of Korean Air seeks to buy rival Asiana Airlines

Nov 12, 2020 (Gmt+09:00)

Hanjin Group, which owns South Korea’s flag-carrier Korean Air Lines Co., is seeking to buy local rival Asiana Airlines Inc., signaling a mega deal in the country’s airline industry.

According to the Financial Services Commission and the financial industry on Nov. 12, Hanjin Group is in negotiations with the state-run Korea Development Bank (KDB), Asiana’s main creditor, to acquire the beleaguered carrier.

If realized, the deal combining Korea’s two largest carriers would see the creation of one of the world’s top 10 airliners.

The KDB will initially inject hundreds of billions of won into Hanjin Group, which in turn will purchase 30.77% of Asiana up for sale, sources said. Hanjin KAL, the parent company of Korean Air, will likely submit a letter of intent (LOI) to Asiana’s main creditor as early as next week.


The proposed deal has also been shared with other government agencies, including the finance ministry and the transport ministry, for discussion, they said.

Asiana, the country’s second-largest full-fledged carrier, has been under creditor control since mid-September after its current owner, Kumho Industrial Co., a construction unit of Kumho Asiana Group, failed to sell the financially troubled company to HDC Hyundai Development Co.

The KDB and other creditors, which already extended a combined 3.3 trillion won to Asiana to help the cash-strapped carrier stay afloat, said in September it plans to funnel as much as 2.4 trillion won from a state fund into Asiana before seeking another buyer.

Asiana is reeling from snowballing debt as it suspended most of its flights on international routes amid the COVID-19 pandemic. As of June, Asiana’s debt totaled 12.84 trillion won ($11.53 billion)

DEAL TO HELP CEMENT HANJIN CHAIRMAN'S MANAGEMENT CONTROL

Industry officials said Hanjin will likely push ahead with its bid for Asiana as it can remove one of its rivals and help Hanjin Chairman Cho Won-tae, currently in a management dispute with his siblings, consolidate his control over the airline group.


“For now, it’s uncertain how the KDB can provide Hanjin with the funds needed for the Asiana takeover. A rights offer to the creditor bank through a third-party share placement may not be possible under the current law,” said Kang Sung-boo, head of activist fund Korea Corporate Governance Improvement (KCGI).

If realized, the merged entity would be a bigger Korean airliner with revenue close to 15 trillion won ($13.4 billion). As of 2019, Korean Air’s revenue reached 12.68 trillion won, while Asiana posted 2.18 trillion won in sales.

Write to Sang-eun Lucia Lee at selee@hankyung.com

In-Soo Nam edited this article.

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