Eastar Jet M&A 'Lookalike' Asiana M&A

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] As HDC Hyundai Development Company's acquisition and merger (M&A) of Asiana Airlines remains stalled for a long time, the failed Jeju Air-Eastar Air M&A case is drawing attention. This is because the issues over preconditions for acquisition and the blame game between the two sides closely resemble each other.

According to the aviation industry on the 2nd, HDC Hyundai Development Company and Kumho Industrial, the major shareholder of Asiana Airlines, have recently exchanged press releases expressing differing views on the closing of the deal. Kumho Industrial has demanded that the deal be closed by the 12th, while HDC Hyundai Development Company is requesting a re-inspection, citing unresolved issues.

The dispute between the two sides is increasingly resembling the Jeju-Eastar Air case. A representative example is that the acquired company first demanded the 'deal closure,' while massive debts and unpaid amounts have emerged as key issues.

Earlier, before the M&A failed, on the 1st of last month, Jeju Air mentioned unpaid amounts of 170 billion won to Eastar Air and stated, "If not resolved within 10 business days, the contract may be terminated." HDC Hyundai Development Company is also raising concerns about Asiana Airlines' rapidly increased debt last year (2.8 trillion won). Kumho Industrial rebutted, saying, "This is due to changes in international accounting standards related to lease liabilities, and sufficient explanations have been provided."

Preconditions for the deal stipulated in the contract are also contentious. Jeju Air raised issues, stating that Eastar Air's payment guarantee for Thai Eastar Jet ($31 million) had not been resolved. HDC Hyundai Development Company is also concerned about Asiana's investment losses with Lime Asset Management. Kumho Industrial stated regarding this, "These issues were sufficiently raised during the preliminary due diligence before signing the M&A contract, and it was already agreed in the contract's disclosure list that these would not be contested," adding, "Detailed explanations were also provided during the acquisition process."

The fact that negotiations between the two sides are mainly conducted in writing is also similar. For example, last month, HDC Hyundai Development Company requested written negotiations while mentioning a renegotiation of acquisition conditions. Lee Dong-gul, chairman of the Korea Development Bank, responded, "This is not a 1960s romance, so what kind of letters are these?" and proposed face-to-face negotiations. However, so far, both sides have officially continued a ping-pong game only through written and certified documents. This resembles the Jeju Air-Eastar Air case, where face-to-face negotiations were completely suspended after May until the deal fell through.

The difference between the two M&As is the presence of creditors. The creditor group, including KDB Industrial Bank, is closely monitoring the situation between HDC Hyundai Development Company and Kumho Industrial. An industry insider said, "Since creditors like KDB are preparing Plan B, future responsibility disputes between the two sides will inevitably differ from the Jeju-Eastar Air case."

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