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HDC Hyundai’s stock drops on bid for Asiana

Sept 05,2019
HDC Hyundai Development submitted a bid for Asiana Airlines, and the construction company’s stock dropped like a rock.

Its shares fell 9.34 percent in trading Tuesday after news of the bid, which was reportedly submitted together with Mirae Asset Daewoo. The decline continued Wednesday.

Kumho Industrial has put its 31-percent stake in Asiana up for sale, and three bidders have emerged.

One of the biggest concerns about HDC is the lack of a clear connection between the business of the acquirer and that of the target. While the company has interests in hotels and duty-free, it has no direct experience with airlines. HDC would also have to take on significant debt to finance the acquisition.

Kim Sun-mi, a KTB Investment & Securities analyst, wrote in a report on Wednesday that the HDC Hyundai Development decision to bid for the airline was “regrettable.”

“The acquisition [bid] for Asiana Airlines does not meet with HDC Hyundai Development Company’s business diversification direction,” Kim wrote in the report. “HDC Hyundai Development Company’s previous strategy was to raise profit stability by managing its housing development projects and distribution facilities.”

“Asiana Airlines, due to the characteristics of the transportation business, has a highly volatility performance and has little connection to development projects.”

The analyst added that although Asiana Airlines and HDC Shilla Duty Free could generate synergy, it would not be enough to balance the burden of servicing the large debt.

Jang Moon-jun, a KB Securities analyst, said HDC Hyundai Development shares will likely struggle until the acquisition process begins. If the company’s bid fails altogether, the stock could bounce back.

The other two bidders are Aekyung Group and KCGI.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]