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HDC remain committed to sign deal for Asiana takeover this year

All News 17:50 December 11, 2019

By Choi Kyong-ae

SEOUL, Dec. 11 (Yonhap) -- HDC Hyundai Development Co., the preferred bidder for Asiana Airlines Inc., said Wednesday it remains committed to signing a deal this year to acquire the country's second-biggest airline.

The company made the statement in response to market concerns that the HDC-Mirae Asset Daewoo consortium won't be able to sign an agreement to purchase a controlling stake in Asiana Airlines from Kumho Industrial Co. on Thursday due to differences over prices and debts.

Kumho Industrial, which owns a 31 percent stake in Asiana Airlines, selected the HDC-Mirae consortium as the preferred bidder on Nov. 12, allowing the consortium to exclusively negotiate with the seller over prices and other terms for a 30-day period ending Thursday.

HDC remain committed to sign deal for Asiana takeover this year - 1

"We have not targeted signing a share purchase agreement by Thursday but aimed at signing it within the year. We are in talks with Kumho Industrial to proceed with the deal," a HDC spokesman said over the phone.

Kumho Industrial also said the company is "fine-tuning" the deal's details without setting the date for the share purchase agreement.

HDC and Kumho Industrial have reportedly been at odds over the pricing of existing Asiana shares and possible contingent liabilities, raising concerns that the two parties may not sign a share purchase agreement as agreed.

The companies did not confirm the reports.

But the two sides appear to be moving forward to sign the deal as planned given that Lee Dong-gull, chairman of the state-run Korea Development Bank (KDB), said last week, "Kumho is in negotiations to sell the airline by December as planned."

On Wednesday, Asiana Airlines jumped 3.4 percent to 5,480 won on the news, far outperforming the broader KOSPI's 0.4 percent gain.

But HDC Hyundai Development plunged 5.6 percent to 25,200 won and Kumho Industrial fell 0.9 percent to 10,800 won on investor concerns over the financial burden buying the airline would place them under.

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 the full-service carrier.

The HDC consortium submitted an overall acquisition price of 2.5 trillion won for the 31 percent stake, as well as new shares to be issued and the airline's six affiliates, which include low-cost carriers Air Busan and Air Seoul Inc.

The 31 percent stake was valued at 365 billion won (US$312 million) 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 response to reports that it plans a rights issue worth 500 billion won to finance the deal, HDC said it is considering issuing new shares and other measures but no decision has been made yet.

In 2018, Asiana Airlines and the KDB signed a deal that required the carrier to secure liquidity through sales of assets and other means.

Asiana Airlines 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.

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.


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