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(LEAD) Jeju Air's Eastar Jet takeover delayed due to overseas regulatory hurdle

All News 18:20 April 28, 2020

(ATTN: ADDS details and debt sale plan in paras 5-7)

SEOUL, April 28 (Yonhap) -- Jeju Air Co., South Korea's leading low-cost carrier, said Tuesday its acquisition of smaller local rival Eastar Jet Co. will be finalized next month as foreign regulators are still reviewing their merger.

Jeju Air signed a deal to acquire a controlling 51.17 percent stake in Eastar Jet from its parent Eastar Holdings Inc. for 54.5 billion won (US$45 million) in March in its expansion strategy.

Jeju Air already paid 11.95 billion won to Eastar Holdings last month, with the remainder originally scheduled to be paid Wednesday.

"The payment is expected to be made next month as Vietnam and Thailand have yet to approve the combination of the two carriers," a company spokesman said over the phone. The takeover plan was approved earlier this month in South Korea.

This file photo taken Dec. 19, 2019, shows planes operated by Jeju Air and Eastar Jet at Gimpo International Airport in western Seoul. (Yonhap)

Once the two Southeast Asian countries approve the deal, South Korea's two state lenders -- the Korea Development Bank and the Korea Export-Import Bank of Korea -- are expected to inject 170 billion won into Jeju Air to help it continue operations amid the growing impact of the coronavirus outbreak.

In other efforts to ride out the COVID-19 fallout, Jeju Air said Tuesday it will raise 10 billion won by issuing convertible bonds with rights to convert into Jeju Air stocks between June 30, 2021, and May 30, 2025.

Eastar Holdings will purchase the convertible bonds to be issued by Jeju Air on June 30, and the bonds can converted into Jeju Air equities at 25,520 won per share during the four-year period.

Jeju Air has said the acquisition will help it gain a bigger market share and strengthen the company's competitiveness in global markets.

South Korea has two full-service carriers -- Korean Air and Asiana Airlines Inc. -- and seven low-cost carriers -- Jeju Air, Jin Air, Air Busan Co., Air Seoul Inc., Eastar Jet, T'way and Fly Gangwon.

Two more LCCs -- Air Premia Co. and Aero K Airlines Co. -- are expected to join the market next year, bringing the country's total number of LCCs to nine.

AK Holdings, the holding firm of South Korean retail conglomerate Aekyung Group, holds a 59.93 percent stake in Jeju Air.

kyongae.choi@yna.co.kr
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