Delayed Asiana M&A 'No Deal'... Kumho and HDC Continue Tug-of-War

Face-to-Face Talks Unlikely to Collapse Despite 'Tiggeoktaek' Over Detailed Negotiation Proposals
Significant Differences on Reinspection and Other Issues Leave Outcomes Uncertain

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] The declaration of a 'No deal' regarding the Asiana Airlines acquisition and merger (M&A) has been temporarily postponed following the acceptance of face-to-face negotiations between Kumho Industrial and HDC Hyundai Development Company (HDC Hyundai). However, both parties are engaged in a tug-of-war over detailed issues. Regardless of the success of the face-to-face talks, significant disagreements over the key issue of re-due diligence remain, leaving the success of the M&A still uncertain.

According to the aviation industry on the 12th, Kumho Industrial and HDC Hyundai are conducting working-level contacts for face-to-face negotiations between their CEOs. Accordingly, the 'No deal' declaration initially scheduled by Kumho Industrial for midnight on the 11th has been temporarily postponed.

Currently, HDC Hyundai is pushing for CEO-level negotiations without prior coordination, while Kumho Industrial has counter-proposed that CEO negotiations take place after prior working-level consultations. A Kumho Industrial official stated, "We are currently at the stage of proposing our position regarding the CEO face-to-face negotiations to HDC and awaiting their response," adding, "Specific matters such as the schedule for the CEO face-to-face negotiations have not yet been decided."

Many expect that the face-to-face negotiations themselves will not be canceled. An industry insider said, "If HDC has the intention to acquire, the counter-proposed CEO-level face-to-face negotiations are a natural step, and even if they do not intend to acquire, it is necessary to follow the established procedures to prepare for future disputes."

If the CEO face-to-face negotiations are realized, the biggest issue is expected to be the re-due diligence. HDC Hyundai insists on a 12-week re-due diligence citing the COVID-19 pandemic and Asiana Airlines' accounting irregularities, whereas Kumho Industrial and creditors argue that Asiana Airlines has provided sufficient data and oppose the re-due diligence.

If HDC Hyundai's demand for re-due diligence is not accepted, a 'No deal' declaration will be inevitable. Conversely, if shortened due diligence based on the intention to acquire Asiana Airlines materializes, the M&A could enter a new phase.

Inside and outside the business community, opinions on the prospects of face-to-face negotiations are divided. Some do not rule out the possibility of a dramatic settlement. The fact that Asiana Airlines posted a surprising profit of 115.1 billion KRW in the second quarter, demonstrating resilience, and that HDC Hyundai's acceptance of face-to-face negotiations came right after HDC Group Chairman Chung Mong-gyu's summer vacation, supports this interpretation.

An industry insider said, "Chairman Chung's intention to acquire has not completely disappeared yet, and stakeholders such as creditors are continuing behind-the-scenes persuasion," he said.

On the other hand, there are many views that the face-to-face negotiations between the two sides are a 'justification-building' move with the return of the performance bond (250 billion KRW) in mind. Kumho Industrial stated in a press release on the 10th that the purpose of the face-to-face negotiations is to 'conclude the deal,' adding, "Whether to notify the termination of the stock purchase agreement after the 12th will be decided based on the progress of consultations such as the CEO face-to-face negotiations." HDC Hyundai also maintains a parallel stance, saying, "The preconditions have not been met."

An industry insider said, "Disagreements over acquisition preconditions, debts, and various suspicions are reminiscent of the previously failed Jeju Air-Eastar Jet case," adding, "It appears to be a justification-building move considering responsibility for the M&A failure and lawsuits over the return of the deposit."

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