Korea’s Sono to sell Air Premia stake to focus on other LCC

South Korea's top resort operator Sono Hospitality Group has decided to sell its entire stake in low-cost carrier (LCC) Air Premia Inc. at a profit of about 20% to focus on another budget airline it is set to acquire.

Sono International Co., the group’s holding company, said on Friday that it is slated to unload a 22% stake in Air Premia, which it holds with Seoul-based private equity house JC Partners Co., the airline’s No. 2 shareholder, to the largest stockholder Tirebank Co. at an estimated 122.7 billion won ($88.1 million), or 1,900 won per share.

The deal is expected to allow Sono to reap a profit of some 20 billion won as the resort operator bought an 11% stake in Air Premia for 1,600 won per share from JC Partners last October, investment banking industry sources said.

JC Partners, which acquired the LCC at 83.2 billion won in 2021, is also predicted to exit from the investment with an internal rate of return of 52%, according to the sources.

TO FOCUS ON T’WAY

Sono in February agreed to acquire another budget carrier T'way Air Co. to create synergies between its leisure and aviation businesses.

The former Daemyung Sono Group had been looking to acquire Air Premia, South Korea's only LCC with flights to the Americas.

Sono bought an 11% stake in the airline, about half of which was held by JC Partners' special purpose company (SPC) while securing an option to purchase the remaining shares.

The group did not need Air Premia as T’way is slated to start flights to Vancouver in July.

Sono also faced hurdles in its acquisition of T'way, as South Korea's antitrust authority requested more information about the deal. Minority shareholders filed a lawsuit alleging that the deal may have involved illegal practices such as breach of trust and unfair trade.

“Sono is already tired of dealing with the government approval and minority shareholders in its takeover of T’way,” said an investment banking industry source. “The group may have decided it is unreasonable to acquire Air Premia on top of that.”

TIREBANK

Tirebank, which already has a 46% stake in Air Premia, is set to further consolidate its position as the largest shareholder of the LCC by purchasing shares from Sono.

The South Korean tire distributor holds the stake through AP Holdings, a private equity firm owned by the founding family.

AP Holdings has a right of first offer to buy an 11% stake from JC Partners. However, this right does not mean that AP Holdings can buy the stake at a price that JC Partners does not want.

Tirebank made a down payment of 20 billion won and must pay the remaining balance by the end of September to finalize the deal.

If the buyer fails to make the payment, JC Partners can exercise drag-along rights, forcing AP Holdings to participate in a company sale on the same terms.

Write to Da Eun Choi and Jong-Kwan Park at max@hankyung.com
 
Jongwoo Cheon edited this article.