News
Asiana confident about its future despite takeover collapse
September 18th 2020
As Asiana Airlines ponders its next steps in an uncertain future, South Korean corporate heavyweights, Hyundai Development Company (HDC) and Kumho Industrial, have traded barbs over the blame for the collapse of a deal to buy the debt-laden carrier. Read More »
In late 2019, a consortium led by HDC and Mirae Asset Daewoo was announced as the preferred bidder to take over Asiana. The purchase included Asiana and its subsidiaries, among them Air Busan and Air Seoul.
The deadline for the 2.5 trillion won (US$2.2 billion) deal, which involved HDC buying Kumho's 31% equity in Asiana, was June 30. It was extended after HDC sought renegotiation of the purchase terms to reflect current market conditions and the airline's financial fragility.
Last Friday, Asiana CEO, Han Chang-soo, announced the deal had been scrapped. In a letter to staff, Han said the decision to break it off was inevitable if Asiana’s value as a corporation was to be preserved. He also took exception to HDC's delay in finalising the deal.
Earlier this week, Han said he remained optimistic about Asiana's prospects but regretted the deal was lost.
"It is a pity to share the news of the M&A failure to employees who are participating in the company-wide unpaid and paid leave [circumstances] since March and who are in the process of overcoming the company’s crisis," Han said, according to a translation of his statement on the Asiana website.
"If we are thoroughly prepared for the post-COVID-19 situation by changing ourselves accordingly, a bright future will unfold before us.”
South Korean aviation watchers expect Asiana, which has been battered by the coronavirus pandemic, would need to be broken up to attract fresh interest. It would require the sale of Air Busan and Air Seoul.
More immediately, Asiana would be led by its creditors, which include the state-run Korea Development Bank (KDB) and Export-Import Bank of Korea. Both had provided financial support to the airline.
KDB, which described the collapse of the deal as regrettable, said earlier this week 2.4 trillion won would be tipped into Asiana by state-run industry funds to keep it going at a time of depressed market conditions due to the coronavirus pandemic, local media reported.
HDC is considering legal action against Kumho and Asiana for the unilateral termination of the deal.
The company said in a statement its request for additional due diligence was not excessive, given Asiana's increasing debt and a recent Fair Trade Commission ruling that fined Asiana, and others, for breaches related to a catering contract. HDC also claimed the KDB had not been working in good faith.
Kumho has rejected HDC's criticisms.
The failure to complete the deal was the second major airline consolidation to fall short in South Korea.
In July, Jeju Air's proposed 54.5 billion won plan to buy a 51% holding in smaller rival, Eastar Jet, was abandoned.
Since then, Eastar has announced mass redundancies, with about half of the company's 1,200 employees likely to lose their jobs, as the airline sought a new investor.
