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Jeju Air shareholder AK to announce partner for Asiana bid
October 11th 2019
AK is criticised for using due diligence to gather business intelligence rather than making genuine offer. Read More »
Jeju Air flagship investor, Aekyung Group (AK), will shortly announce the financial partner that is assisting its bid for major equity in Asiana Airlines. The market cap of Korea’s number two airline is estimated by the local sector to be approximately two trillion won (US$1.7 billion). Even though AK would take significant but minority equity in the deal, the sum is considerable and more than AK’s estimated cash position of 200-300 billion won.
Korean law prohibits financial investors from holding a major shareholding in an airline. The so-called “strategic investors” partner with financial investors to boost capital in the deal.
The market is anxious for AK to name its financial investor partner. AK said it will make an announcement sometime in the middle of this month.
AK is facing controversy about its due diligence on Asiana. Of the four bidders for the carrier, AK was the only one to request significantly detailed company figures, Kyunghyang Newspaper said.
AK reportedly wanted to see Asiana’s profit and loss figures by route, contracts of all 54 leased aircraft and the geographical spread of employees. AK is the only bidder with a direct aviation background, which suggested it knew what details to examine at Asiana. “As we need to identify contingent liabilities, reviewing contracts is the most important [factor] during due diligence,” an AK spokesperson said.
Kyunghyang cited unnamed sources that speculated AK wanted the Asiana information to help Jeju Air, including improving the LCC’s management and to study long-haul performance. Jeju Air only flies 737s in short-haul markets.
