Hanjin KAL and KDB Sign Investment Agreement... Official Start of Asiana Airlines Acquisition

Korean Air and Asiana Airlines aircraft standing on the apron at Incheon International Airport [Image source=Yonhap News]

[Asia Economy Reporter Seongpil Cho] Hanjin KAL, the holding company of Korean Air, signed an investment agreement with the Korea Development Bank on the 17th, officially commencing the acquisition process of Asiana Airlines.

On the same day, Hanjin KAL signed an investment agreement to raise a total of 800 billion KRW through a new share subscription contract and a convertible bond subscription contract with the Korea Development Bank. The investment agreement specified seven major obligations that Hanjin KAL must comply with. These obligations include the appointment of three outside directors and audit committee members designated by the Korea Development Bank, as well as prior consultation and consent rights regarding major management matters.

Responsibilities such as the establishment and operation of an Ethics Management Committee, and cooperation and supervision to allow the Management Evaluation Committee to conduct management evaluations of Korean Air, are also included as mandatory provisions. The committee will be established to ensure ethical management by Hanjin KAL and key affiliates' executives, and family members such as Executive Director Hyunmin Cho of Hanjin KAL and Advisor Myunghee Lee of Jeongseok Enterprises will not participate in the management of airline-related affiliates.

The Korea Development Bank also assigned Hanjin KAL the responsibility to establish and implement an integration plan (PMI) after acquiring Asiana Airlines. The agreement includes provisions that Hanjin KAL must provide Korean Air shares as collateral to the Korea Development Bank and is prohibited from disposing of them. Violation of key provisions of the investment agreement will result in a penalty of 50 billion KRW and liability for damages.

The acquisition process of Asiana Airlines by Korean Air, initiated by this investment agreement, is expected to be completed around June next year. When Korean Air subscribes to Asiana Airlines' new shares, it will become the largest shareholder. Kumho Industrial, the current largest shareholder, is expected to see its stake fall below 20%. The governance structure will be Hanjin KAL → Korean Air → Asiana Airlines. Korean Air plans to operate Asiana Airlines as a subsidiary initially and absorb it within 1 to 2 years.

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