Delayed Asiana Cargo Sale... One-Month Due Diligence Completed

Korean Air Headquarters, Gangseo-gu, Seoul Photo by Younghan Heo

원본보기 아이콘

The due diligence for candidates interested in acquiring Asiana Airlines' cargo division was recently completed. With the selection of the preferred bidder within sight, the merger and acquisition between Korean Air and Asiana Airlines is expected to accelerate. Cho Won-tae, Chairman of Hanjin Group, emphasized in a recent interview with a foreign media outlet, "We will finalize it by the end of October."

According to industry sources on the 3rd, Korean Air and the sales advisory firm UBS completed due diligence on three acquisition candidates?Air Premia, Air Incheon, and Eastar Jet?at the end of last month. Initially, the preferred bidder was to be selected in early May, one week after the main bid, and the stock purchase agreement was scheduled to be signed by the end of this month. However, the seller extended the due diligence period, delaying the expected schedule by more than a month. All three candidates proposed similar prices around 500 billion KRW, requiring a thorough review of their financing and business execution plans.

The tug-of-war over the price is also cited as a reason for the delayed announcement. It is reported that the seller wanted to set a higher ratio for the performance bond. Since the final deal could take more than a year to complete, they wanted to submit a more definitive contract to European competition authorities. Earlier, the European Commission (EC) approved the merger of Korean Air and Asiana Airlines in February on the condition that Korean Air divest Asiana Airlines' cargo division. An aviation industry insider explained, "It is hard to say that any of the three candidates clearly stood out," adding, "The seller's concerns deepened because there was no satisfactory candidate."

The seller plans to select the preferred bidder by mid-month at the latest. Once the preferred bidder is decided, Korean Air's acquisition of Asiana Airlines will come into clearer view. On the 2nd (local time), Cho Won-tae, Chairman of Hanjin Group and CEO of Korean Air, stated in an interview with Bloomberg in Dubai, United Arab Emirates (UAE), "We will obtain merger approval from the United States by the end of October," emphasizing, "We have taken all the measures required by the U.S. and the European Union (EU), including the sale of Asiana Airlines' cargo division and adjustments to some long-haul passenger routes, so no further concessions should be necessary." Currently, Korean Air is awaiting approval only from the U.S. among 14 competition authorities.

Additionally, Chairman Cho expressed trust in Boeing, the aircraft manufacturer recently embroiled in safety controversies due to aircraft defects, and announced plans to order 30 Boeing aircraft as early as next month. Earlier, Boeing has been under investigation by the U.S. Federal Aviation Administration (FAA) following an incident in January where modular components detached inside the cabin of a 737 Max 9 passenger plane carrying 177 people.

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.