Kumho Industrial "Regret HDC's Passing of Responsibility... Cooperate Sincerely to Conclude the Deal"

Possibility of Asiana Acquisition Falling Through Increases... Kumho and HDC Begin Full-Scale Responsibility Dispute

Kumho Asiana Group has ultimately decided to sell Asiana Airlines. It is reported that Kumho Asiana Group and the Korea Development Bank will coordinate a revised self-rescue plan on the morning of the 15th. Subsequently, Kumho Industrial is expected to hold an emergency board meeting to approve the revised self-rescue plan, which includes the sale of a 33.47% stake in Asiana Airlines, and then submit it to the creditors. The photo shows the Kumho Asiana headquarters on Ujeongguk-ro, Jongno-gu, Seoul, on the same day. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Yu Je-hoon] Amid the stalled merger and acquisition (M&A) process of Asiana Airlines, Kumho Industrial expressed regret on the 30th, urging HDC Hyundai Development Company to "cooperate sincerely to conclude the deal." The differing positions of both parties appear to be turning into a blame game.

Kumho Industrial issued a press release stating, "We strongly regret that the press release distributed by HDC Hyundai Development on the 26th distorts the facts, avoids concluding the deal, and shifts the responsibility onto Kumho Industrial and Asiana Airlines."

Earlier, HDC Hyundai Development had requested about 12 weeks of re-due diligence, citing uncooperative behavior from Kumho Industrial and Asiana Airlines in submitting materials. In response, Kumho Industrial sent a reply suggesting that the deal be concluded by August 12.

Regarding HDC Hyundai Development's claims, Kumho Industrial pointed out, "HDC Hyundai Development has dispatched a large-scale acquisition team for seven months to receive all significant operational and financial information of Asiana and its subsidiaries, conducting due diligence and post-merger integration (PMI) work, and Asiana has provided full cooperation despite bearing managerial burdens." They added, "This level of cooperation is unprecedented in the history of domestic M&A." Kumho Industrial further stated, "It is deeply regrettable that HDC Hyundai Development distorts facts by claiming they have not even received a basic contract."

Regarding the surge in debt (2.8 trillion KRW) cited by HDC Hyundai Development as a re-examination issue, Kumho Industrial explained, "This relates to increases in lease liabilities and deferred mileage revenue, which are unrelated to cash flow, reflecting changes in lease-related standards by the International Accounting Standards Board." They added, "This explanation has been sufficiently provided to HDC Hyundai Development through the activities of the acquisition preparation committee since January."

Concerning investment losses from Lime Asset Management funds, Kumho Industrial rebutted, "This information was sufficiently provided during the pre-due diligence before the M&A contract was signed last year, included in the disclosure list in the contract, and agreed upon by the parties not to be an issue." They also stated, "This was explained concretely and in detail through the acquisition committee activities that lasted over seven months."

A Kumho Industrial official remarked, "Regarding these matters, Asiana's management directly reported face-to-face to HDC's top executives," adding, "There were no questions during the explanations, but suddenly a formal letter requesting re-examination was sent, which even surprised the creditors' representatives."

For these reasons, Kumho Industrial views the issues raised by HDC Hyundai Development as not grounds for refusing to conclude the deal or terminating the contract. A Kumho Industrial representative emphasized, "Environmental changes due to the novel coronavirus disease (COVID-19) are not grounds for contract termination," adding, "In 2008, during the global financial crisis, a case where a deposit refund claim was dismissed because it was not a valid reason for contract termination also exists."

Kumho Industrial stated that it is willing to cooperate with re-due diligence if HDC Hyundai Development shows sincerity in the transaction. Kumho Industrial said, "It should first be made clear that HDC Hyundai Development sincerely expresses its intention to acquire and will cooperate as much as possible to conclude the deal according to the current schedule," adding, "If HDC Hyundai Development officially clarifies this, promptly responds to the ongoing requests for face-to-face consultations, and shows a proactive attitude toward concluding the deal, we are willing to engage in discussions related to post-acquisition management checks of Asiana."

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