Aekyung Forms Consortium with Local PEF for Asiana Acquisition | Be Korea-savvy

Aekyung Forms Consortium with Local PEF for Asiana Acquisition

Aekyung Group's headquarters in northwestern Seoul. (image: Aekyung Group)

Aekyung Group’s headquarters in northwestern Seoul. (image: Aekyung Group)

SEOUL, Oct. 21 (Korea Bizwire)Aekyung Group, a South Korean cosmetics-to-airline conglomerate, said Monday it has formed a consortium with a local private equity fund (PEF) to submit a final bid for Asiana Airlines Inc.

Aekyung and Stone Bridge Capital have joined hands to participate in the auction to acquire a controlling 31 percent stake in Asiana Airlines as strategic investor and financial investor, respectively, the company said in a statement.

“There is no precedent in which a company that does not have experience of operating an airline has succeeded in airline acquisition. As Aekyung has Jeju Air under its wing, its acquisition of Asiana Airlines is in line with global M&A trends,” the statement said.

Among the bidders, Aekyung has been the most aggressive, stressing it is the only strategic investor that has 13 years of experience and know-how in operating an airline.

AK Holdings, the holding firm of Aekyung Group, owns a 56.9 percent stake in Jeju Air Co., the nation’s largest low-cost carrier by sales.

The deal’s lead manager Credit Suisse sent a letter to four initial bidders, including a consortium formed by Hyundai Development Co. (HDC) and Mirae Asset Daewoo and another led by the local activist fund Korea Corporate Governance Improvement (KCGI), on Thursday, asking them to submit a final bid on Nov. 7.

Kumho Asiana, the parent of Asiana Airlines, aims to sell the 31 percent stake in the airline held by its subsidiary, Kumho Industrial Co., together with its six affiliates as part of its broad restructuring efforts.

The six affiliates include two budget carriers — Air Seoul Inc., which is wholly owned by Asiana Airlines, and Air Busan Co., which is 46 percent owned by the airline.

The 31 percent stake was valued at 360 billion won (US$307 million) at Monday’s closing price of 5,230 won.

But analysts estimate the deal could fetch up to 2 trillion won when management premiums and the value of new shares to be issued are taken into account.

Kumho Asiana aims to complete the sale of the airline unit this year.

In 2018, Asiana Airlines and its main creditor, the state-run Korea Development Bank, signed a deal that required the carrier to secure liquidity through sales of assets and other means.

In the January-June period, the airline’s net losses widened to 292 billion won from 43 billion won a year earlier due to the won’s weakness against the dollar.

A weak won not only drives up the value of dollar-denominated debts when converted into the local currency but also increases purchasing costs.

Asiana owed financial institutions a total of 2.7 trillion won as of the end of June, with 500 billion won of loans due to mature by the end of December.


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