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On the 16th, the Korean Government and Development Bank officially announced the acquisition of Asiana Airlines by Korean Air.
It is promoting the launch of the integrated national airline ‘Global Top 10’ combining the number 1 and 2 in Korea.
On the 16th, KDB announced on the 16th that “We will promote the integration of Korean Air and Asiana Airlines” and “We will seek to strengthen the fundamental competitiveness of the domestic aviation industry through the launch of an integrated domestic airline.”
Earlier, the government held a meeting of interested ministers (Sankyungjang) to strengthen industrial competitiveness this morning to discuss ways to normalize Asiana Airlines, and concluded this.
On the morning of the 16th, when Hanjin Kal’s board of directors was held, an official moves out of Korean Air’s Seosomun office building, Jung-gu, Seoul. On that day, the Korean Development Bank decided to invest 800 billion won to promote Korean Air’s acquisition of Asiana Airlines. It is a method in which KDB invests 500 billion won as a paid capital increase assigned to a third party to Hanjin Kal, the parent company of Korean Air, and purchases a redeemable bond (EB) worth 300 billion won. . Yunhap news
Regarding the details of the transaction, KDB invests 800 billion won in Hanjin Kal, which is at the top of the Hanjin Group governance structure. 500 billion won is a paid-in capital increase assigned to a third party, and 300 billion won is a method of acquiring redeemable bonds (EB) using Korean Air stock as the underlying asset.
Hanjin Kal announced that he would lend this 800 billion won to Korean Air.
In addition, Hanjin Kal will participate in Korean Air’s KRW 2.5 trillion paid-in capital increase for the acquisition of Asiana Airlines. Hanjin Kal’s assigned stake is KRW 7.317 billion, which becomes Hanjin Kal’s 29.2% stake in Korean Air after the share acquisition. The expected date to acquire shares is March 13 of next year.
Korean Air will invest 1.8 trillion won in Asiana Airlines as a paid-in capital increase. Asiana Airlines will acquire new shares of KRW 1.5 billion. After acquiring shares, Korean Air’s stake in Asiana Airlines becomes 63.9%, becoming the largest shareholder. The expected date to acquire shares is June 30 of next year.
Korean Air is also purchasing permanent bonds from Asiana Airlines for 300 billion won.
“We will invest as soon as possible this year,” Vice President Choi Sang-hyeon told a news conference. “Korean Air’s paid-in capital increase will be implemented early next year.”
In addition, KDB announced that it will seek a gradual integration of the three low-cost airlines (LCC), which are subsidiaries of both companies (Jin Air, Air Busan and Air Seoul).
The integrated national airline, to be created through this transaction, will become one of the top ten in the global aviation industry, the KDB explained.
In terms of passenger and cargo transportation performance in 2019, Korean Air was ranked 19th and Asiana Airlines 29th, and if the transportation volumes of both companies are simply combined, it will rise to seventh in the world.
Based on the expansion of the Incheon Airport slot (permitted aircraft take-off and landing capacity), the plan is to expand cooperation with global airlines, develop new routes and achieve economies of scale through traffic demand in the Foreign.
The KDB added that it will increase profitability by creating integrated synergies such as streamlining route operation, reducing operating costs and reducing interest expense.
Vice President Choi said, “I think there will be no artificial restructuring considering the annual natural downsizing of the two companies and promoting new projects,” and said, “Hanjin has confirmed us.”
The plan to launch an integrated national airline is an obstacle that arose from trying to normalize the plan after the acquisition of Asiana Airlines by HDC Hyundai Development in September.
The perception seems to be that it is unreasonable to continue government support for the two large airlines, which are increasing difficulties as the Corona 19 crisis drags on.
Public funds of 3.5 trillion won were already invested in Asiana Airlines and 1.2 trillion won in Korean Air in April, and additional financial support was discussed.
Consequently, the government adopted the second Hyundai-Kia Motors integration as a standardization plan.
The Ministry of Lands, Infrastructure and Transport said: “As the aviation business environment continues to decline, the merger and acquisition of the two major airlines is inevitable in terms of ensuring that the aviation industry is not insolvent.”
However, there are many mountains to overcome in the integration process.
First, the opposition of KCGI, an activist private equity fund (PEF) facing President Cho Won-tae over the management of Hanjin Group, is against the acquisition of Asiana Airlines is a major obstacle.
Earlier, KCGI said: “Hanjin Kal’s capital increase, a normal company with an indebtedness ratio of only 108%, should be clearly interpreted as a friendly stake in Cho Won-tae and the existing management. a third party that wastes blood, our association of shareholders, the main existing shareholder, will participate first in terms of responsible management ”.
He pointed to the point of government involvement in the dispute over the management of private companies. If KDB participates in Hanjin Kal’s paid-in capital increase to a third party, Chairman Cho Won-tae may gain an advantage in the management dispute with KCGI.
Vice President Choi said: “We will not unilaterally exercise favorable voting rights.” I decided to give it to me. “
Approval of a business combination by the FTC is also required.
Since the Fair Trade Commission approved the merger between Jeju Port and Eastar Jet, if Asiana Airlines is considered to be a non-renewable company, the combination with Korean Air may be allowed.
In this process, it is expected to be controversial that the KDB will invest an additional blood tax to save a company that cannot be revived.
Vice President Choi said, “Rather, routes and schedules will be diversified and consumer benefits such as mileage integration are expected to increase,” regarding concerns about consumer harm caused by the monopoly.
Yunhap news
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