HDC Hyundai Development-Kumho 'Ping-Pong Game'... Resembling Jeju-Eastar Case

Many Similarities in 'Written' Negotiations Including Financial Conditions for Interpretation Vehicles Meeting Pre-Conditions
Speculation on Justification Building Considering Acquisition Failure

Asiana Airlines, expected to renegotiate the acquisition with HDC Hyundai Development Company, held an extraordinary general meeting of shareholders on the morning of the 15th at its headquarters in Osoe-dong, Gangseo-gu, Seoul, where it resolved to increase the total number of shares to be issued and the limit of convertible bonds for capital expansion. After the shareholders entered, employees were removing the guide signs. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Yoo Je-hoon] The merger and acquisition (M&A) of Asiana Airlines is following the same path as the Eastar Airlines M&A. The buyer, HDC Hyundai Development Company, and the seller, Kumho Industrial, are engaged in a ping-pong game that closely mirrors the Eastar Airlines case. Industry insiders interpret this as both parties trying to build a 'justification' ahead of a potential breakup.

According to the industry on the 27th, HDC Hyundai Steel proposed a 12-week re-due diligence to Kumho Industrial on the 24th, stating that "the representations and warranties under the contract are not truthful or accurate in important aspects, and there are clear breaches of explicit commitments, so the preconditions for closing the deal have not been met."

This was a response to a letter sent by Kumho Industrial on the 14th, which stated that "since the preconditions have been completed, let's close the deal." HDC Hyundai Steel cited the targets for re-due diligence as ▲a surge in debt (2.8 trillion KRW) ▲additional borrowing without buyer consent (1.7 trillion KRW) ▲unfair support to insolvent affiliates.

The industry views the moves by HDC Hyundai Steel and Kumho Industrial as a mirror image of the Jeju Air and Eastar Holdings M&A, which ended in a 'no deal.' The differences in preconditions for acquisition, the scale of debt or unpaid amounts, and the attitudes shown by both sides during negotiations are all similar.

For example, last month, HDC Hyundai Steel requested 'written' negotiations while mentioning renegotiation of acquisition conditions. Lee Dong-geol, chairman of the Korea Development Bank (KDB), countered by saying, "This is not a 1960s romance, what kind of letters are these?" and proposed face-to-face negotiations. However, so far, both sides have only continued the ping-pong game through official letters and certified documents. This resembles the Jeju Air-Eastar Airlines case, where face-to-face negotiations were completely halted since May until the deal collapsed. An industry insider added, "Exchanging opinions in writing may also be a way to accumulate evidence in preparation for future disputes."

In fact, HDC Hyundai Steel stated in a position paper, "Since early April, we have sent more than ten official letters conveying detailed matters requiring re-examination, but so far, we have not received sufficient official documents or even a basic contract," and claimed, "We even suspect that they have internally decided and prepared for contract termination."

Kumho Industrial, which has taken over the 'ball,' has yet to respond to HDC Hyundai Steel's counterproposal. A Kumho Industrial official said, "At this point, we have no particular position." The main creditor bank, KDB, plans to hold an internal meeting on the day to discuss countermeasures. It is also reported that Lee Dong-geol, chairman of KDB, has instructed preparations for Plan B and other measures in advance.

If the acquisition ultimately fails after this ping-pong game, Asiana Airlines is expected to remain under creditor management for the time being and become a target for resale. This is mainly because it is difficult to find a third buyer amid the prolonged COVID-19 pandemic. In this case, industry experts believe that significant restructuring for separate sales of the parent company Asiana Airlines and its subsidiaries such as Air Busan, Air Seoul, and Asiana IDT will be inevitable.

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