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Asiana deal set to become another botched M&A in airline sector

All News 15:06 September 03, 2020

SEOUL, Sept. 3 (Yonhap) -- HDC Hyundai Development Co.'s planned takeover of Asiana Airlines Inc. is facing the increasing risk of falling through, as the property developer and the airline's creditors have failed to narrow differences over acquisition terms, industry sources said Thursday.

HDC Chairman Chung Mong-gyu and Lee Dong-gull, chairman of main creditor Korea Development Bank (KDB), met last week to discuss all possible options to push forward the stalled deal amid the coronavirus outbreak.

But HDC appears to have decided not to acquire the debt-ridden carrier, though the KDB proposed some financial support in return for completing the deal.

Asiana deal set to become another botched M&A in airline sector - 1

In an email sent to the creditors Wednesday, HDC reportedly once again demanded another round of due diligence on Asiana Airlines for 12 weeks, which was already rejected by the KDB.

HDC's request for further due diligence on the carrier is widely seen as a step to scrap the deal amid the growing impact of the COVID-19 pandemic on the airline industry.

HDC and Asiana's creditor banks -- the KDB and the Export-Import Bank of Korea (Eximbank) -- declined to comment on the deal.

If the deal falls through, Asiana Airlines will be placed under the control of the creditors, and the government may consider extending a financial helping hand to the debt-ridden carrier, industry insiders said.

Despite HDC's repeated reaffirmation of its takeover plan, the deal has been widely expected to follow in the footsteps of a recent deal collapse between two low-cost carriers due to the impact of the virus.

Jeju Air Co., the country's biggest budget carrier, terminated its planned takeover of smaller rival Eastar Jet Co. in July, citing growing virus-related uncertainties.

This photo, taken on Aug. 2, 2020, shows Asiana Airlines planes at Gimpo International Airport in western Seoul. (Yonhap)

In December, the HDC-led consortium signed the deal to acquire a 30.77 percent stake in Asiana Airlines from Kumho Industrial, a construction unit of Kumho Asiana Group, as well as new Asiana shares to be issued and the carrier's six affiliates, for 2.5 trillion won (US$2.2 billion).

The consortium was scheduled to complete the acquisition by June 27. But in June, it demanded renegotiations with Kumho and the creditors over acquisition terms due to the worsening virus impact on airlines.

HDC described the virus crisis as an "unexpected and very negative factor" that will affect its planned acquisition.

Asiana has suspended most of its flights on international routes since March, dealing a further blow to its bottom line.

Its net losses deepened to 432.88 billion won in the January-June period from 267.4 billion won a year earlier.


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