HDC Hyundai Development, "Asiana Airlines Sale Failure Due to Kumho Industrial" Considering Legal Action

[Asia Economy Reporter Yoo In-ho] HDC Hyundai Development Company is considering a lawsuit to recover a performance bond of 250 billion KRW related to the failed acquisition of Asiana Airlines.

On the 15th, HDC Hyundai Development Company (HDC Hyundai) expressed regret over Kumho Industrial and Asiana Airlines' unilateral notification on the 11th to terminate the acquisition contract of Asiana Airlines, through a press release titled "Position on the Termination of the Kumho Asiana Contract."

Contrary to the claims of Asiana Airlines and Kumho Industrial, HDC Hyundai stated that the failure to close the deal was due to the seller's failure to meet precedent conditions. On the 11th, Kumho Industrial officially declared the collapse of HDC Hyundai's acquisition contract for Asiana Airlines.

Accordingly, HDC Hyundai plans to conduct a legal review of the termination of the contract by Asiana Airlines and Kumho Industrial and the procedures required to release the pledge on the 250 billion KRW deposit, and then proceed with related responses.

In its statement, HDC Hyundai said, "We have faithfully fulfilled our contractual obligations by securing acquisition funds, proceeding with domestic and international corporate merger approval procedures, and establishing a successful strategy after acquisition for the successful acquisition of Asiana Airlines," adding, "However, there were significant changes between Asiana Airlines' baseline financial statements and the 2019 audited financial statements, which form the basis of the acquisition contract, making it impossible to continue this contract."

Regarding the insistence on re-due diligence, HDC Hyundai explained, "Re-due diligence was an essential procedure to close the acquisition contract of Asiana Airlines," and pointed out, "During the acquisition process, Asiana Airlines undertook large-scale borrowings, issued convertible bonds (CB), and supported insolvent affiliates without obtaining the acquirer's consent, which is a mandatory condition under the contract, thus increasing the necessity for re-due diligence."

HDC Hyundai claimed that proceeding with the Asiana Airlines acquisition without re-due diligence would have raised issues of breach of fiduciary duty. They cited the recent Fair Trade Commission's imposition of hundreds of millions of KRW in fines on Kumho Asiana for unfair support between affiliates, and the prosecution of the group head, management, and corporation as legal risks that have materialized as grounds for breach of fiduciary duty.

HDC Hyundai stated, "If the transaction had been closed as is, concerns would have increased not only about breach of fiduciary duty by related executives and employees but also about the survival of the HDC Group itself, so the demand for re-due diligence was by no means an unreasonable request," adding, "After re-due diligence, a more advanced discussion would have taken place with Asiana Airlines, Kumho Industrial, and creditors to establish a business plan for the coming years to determine whether Asiana Airlines could endure future uncertainties, making the current suspension of the acquisition all the more regrettable."

HDC Hyundai also held the creditor, Korea Development Bank (KDB), responsible. HDC Hyundai said, "The creditor KDB only conveyed a comprehensive position that all possibilities, including adjustments to existing acquisition conditions, were open for future discussions, but did not present any specific proposals nor made demands regarding HDC Hyundai's acquisition conditions," and added, "During the meeting on the 26th of last month, while mentioning the need for re-due diligence, we did not insist on the 12-week period."

They continued, "In the discussion points sent on September 2 regarding the acquisition of Asiana Airlines, we stated, 'After an accurate diagnosis of Asiana Airlines' current financial and management status and a review of its future sustainability, discussions on acquisition conditions will definitely be necessary, so we look forward to serious future discussions,' but KDB made no response and officially announced the failure of the acquisition through the media," adding, "And the seller, Kumho Industrial, unilaterally notified the termination of the contract on the 11th."

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