'At the Edge' Eastar M&A... A Week of Destiny

Temporary Eastae Extraordinary General Meeting 'Failed' Again on This Day... Postponed Again
Jeju Air Expected to Comment on Acquisition Controversy as Early as the 7th

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] Jeju Air's acquisition and merger (M&A) of Eastar Jet has been pushed to the 'brink.' As the M&A faces the risk of collapse, the Ministry of Land, Infrastructure and Transport, the main government agency overseeing the aviation sector, has stepped in to urge the deal's completion. Jeju Air plans to release a statement as early as the 7th regarding the controversies that have arisen during the M&A process.

Eastar Jet held an extraordinary shareholders' meeting at 9 a.m. on the 6th at its headquarters in Gangseo-gu, Seoul, but it ended after just 10 minutes without any agenda being resolved. Choi Jong-gu, CEO of Eastar Jet, who attended the meeting, left without making any remarks. A representative from Eastar Jet explained, "The extraordinary shareholders' meeting has been postponed again to the 23rd."

In fact, this extraordinary shareholders' meeting had little practical significance as Jeju Air did not propose any new director or auditor candidates. Eastar Jet had also held an extraordinary shareholders' meeting on the 26th of last month to expand the number of issued shares (from 100 million to 150 million shares) and to appoint new directors and auditors. However, since the acquiring party, Jeju Air, did not recommend any director or auditor candidates, the meeting was postponed to this date.

Moreover, Jeju Air had sent a final ultimatum to Eastar Jet stating that "if the preconditions for acquisition are not fulfilled within 10 business days, the contract may be terminated." Jeju Air maintained its stance, saying, "Our position that the preconditions for acquisition must be met remains unchanged." An Eastar Jet official also said, "It was a shareholders' meeting without any real meaning from the start," adding, "It probably means the company has no sharp measures to take."

It is known that fulfilling the preconditions required by Jeju Air would require at least 80 billion to 100 billion KRW in funds. This includes unpaid wages for employees from February to June, operating costs for partner companies, airport facility usage fees, and payment guarantees for Thai Eastar Jet (approximately 31 million USD). For Eastar Jet, which had planned to cover these costs with the sale proceeds, this is an immediately unsolvable situation.

As the possibility of the acquisition falling apart grows, Minister Kim Hyun-mi of the Ministry of Land, Infrastructure and Transport has stepped in to mediate. On the 3rd, Minister Kim reportedly met with Chae Hyung-seok, Vice Chairman of the parent company of Jeju Air, the Aekyung Group, and Lee Sang-jik, a Democratic Party lawmaker and the actual major shareholder of Eastar Jet, to hear about the progress and urged the completion of the M&A.

With the government also mediating, the M&A battle has become even more difficult to navigate. An industry insider said, "The aviation industry is one of the representative regulated industries," adding, "The Aekyung Group and Jeju Air are likely deeply concerned about this deal."

Jeju Air plans to release a detailed position on the acquisition as early as the 7th. Inside and outside Eastar Jet, as the acquisition faces the risk of collapse, there have been calls for accountability, alleging that Jeju Air effectively directed the shutdown of air routes and restructuring since March. In fact, the Eastar Jet Pilots' Union revealed an internal document on this day stating that Jeju Air directly discussed the scale, job categories, and compensation plans for the layoffs with Eastar Jet in early March. A Jeju Air official said, "We are currently conducting a legal review," adding, "We will respond to one-sided claims related to the acquisition."

This content was produced with the assistance of AI translation services.