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Three bidders are vying for 31% Asiana Airlines stake

Sept 04,2019
Aekyung, Mirae Asset Daewoo and KCGI are bidding for the 31-percent stake in Asiana Airlines being sold by Kumho Industrial as well as interests in two budget carriers.

Although neither Asiana Airlines nor Credit Suisse, which is managing the sale, would confirm the bidders, market sources said that they have submitted their proposals.

The primary bidder is expected to be selected in November.

The bidding for the airline comes nearly five months after the struggling group decided to sell off its sizable interest in Asiana Airlines, its largest holding.

Aekyung, the cosmetics conglomerate, is the only bidder with experience in the airline business. It currently owns Korea’s first and largest budget carrier, Jeju Air.

Jeju Air, with 40 planes and 10 years of experience in the budget airline business, is seen achieving valuable synergies if the parent were to acquire Asiana Airlines, Korea’s second-largest carrier.

The budget airline will be able to expand its service to include long-haul routes to the United States and Europe, which would put it into direct competition with Korean Air.

Its biggest obstacle is a lack of financing. AK Holdings, the parent, only has 1.38 trillion won in current assets and 355 billion won in cash and cash equivalents.

Mirae Asset Daewoo is reported to have entered a bid at the last moment, forming a consortium with HDC Hyundai Development. The financial company is reported to be participating as a financial investor, while HDC Hyundai Development is said to be participating as a strategic investor.

While Mirae Asset, Korea’s largest brokerage group, has the financial means, HDC Hyundai Development could generate synergy in buying Asiana Airlines because of its hotel and duty-free businesses.

KCGI is the second-largest shareholder of Hanjin Kal, the 30-percent owner Korean Air. While KCGI has reportedly formed a consortium, it did not disclose details.

Despite earlier expectations, Asiana Airlines failed to generate strong interest, especially as the sale is being pursued as the economy slows.

There have been expectations in the market that a number of conglomerates, such as SK, Hanwha, CJ and GS, might participate.

But these conglomerates have denied their interest in buying the carrier.

“The burden of acquiring Asiana Airlines is growing with the worsening profitability of airliners in the second quarter,” said Hong Joon-ki, a Cape Investment & Securities analyst. “Uncertainties about third quarter-performance has deepened as sentiment towards traveling to Japan has worsened while China has banned new flight routes amid the overall slowing growth in the airline industry.”

In the first half, Asiana Airline reported a net operating loss of 116.9 billion won. This compares with an 89.4 billion won operating profit a year earlier.

Price is also a factor.

The asking price on the airliner is said to be at least 1 trillion won.

BY Lee Ho-Jeong [lee.hojeong@joongang.co.kr]