Builder signs to acquire Asiana Airlines
HDC Hyundai Development Co., a midsized construction company, signed a deal on Friday to acquire Asiana Airlines Inc. as the South Korean builder strives to diversify its business portfolio.
In their board meetings held early Friday, HDC and Kumho Industrial Co., a construction unit of Kumho Asiana Group, approved the deal.
The signing comes after the consortium formed between HDC and Mirae Asset Daewoo was picked the preferred bidder last month to acquire a revised 33.5-percent Asiana stake held by Kumho Industrial, as well as new shares to be issued and the airline’s six affiliates, for 2.5 trillion won (US$2.2 billion).
“We plan to invest more than 2 trillion won in new shares to be issued by Asiana Airlines to help improve the airline’s financial status. We will focus on improving profitability by streamlining routes and enhancing cost effectiveness,” an HDC official said over the phone.
HDC expected the capital injection to help lower the airline’s debt-to-equity ratio to 300 percent from 660 percent.
HDC said it will pay 320 billion won for the 31-percent Asiana stake. Kumho Industrial said it plans to spend some of the money to repay debt it owes to the state-run Korea Development Bank (KDB) and other local lenders.
Last month, the HDC-Mirae consortium beat two consortia led by airline-to-cosmetics conglomerate Aekyung Group and homegrown private equity fund Korea Corporate Governance Improvement (KCGI), respectively, in the auction for Asiana Airlines and its six affiliates that include low-cost carriers Air Busan and Air Seoul Inc.
The 33.5-percent stake was valued at 365 billion won at the closing price of 5,310 won on Nov. 7 when the consortia submitted their final bids to the deal’s lead manager, Credit Suisse.
In 2018, Asiana Airlines and its main creditor KDB signed a deal that required the country’s second-biggest air carrier to secure liquidity through sales of assets and other means.
Asiana Airlines currently owes financial institutions a total of 3 trillion won, with 150 billion won of loans due to mature by the end of this year.
From January-September, Asiana posted a net loss of 524.14 billion won, swinging from a net profit of 6.33 billion won a year ago.
A combination of lower demand for travel to Japan amid a trade dispute, a weak won against the dollar and lower cargo-carrying volumes dealt a blow to the earnings results.
It also shifted to an operating loss of 173.88 billion won from an operating profit of 186.52 billion won during the cited period. Sales fell 2.4 percent to 5.30 trillion won from 5.43 trillion won.