The sale of a major stake in Asiana Airlines opened for bidding just over a month ago. Yesterday, it was revealed that at least three serious bids have been received. In the running are Aekyung Group, owners of Jeju Air, a consortium led by Mirae Asset and an activist fund, KGCI, who have a stake in Korean Air Lines.
South Korea’s second largest carrier, Asiana Airlines, has been up for grabs since 2018, when its main creditor, Korea Development Bank, demanded that the carrier secure liquidity through the sale of assets and other means. Since then, Asiana’s owners, Kumho Asiana, has been looking for investors to take a share of the airline in order to raise funds.
The owners are looking to sell a 31% stake in Asiana, currently held by Kumho Industrial Co. As well as this, budget carrier Air Seoul who are wholly owned by the airline are bundled into the deal, as well as Air Busan, which is 46% owned.
According to the Korea Herald, the airline’s losses widened in the first half of the year to 292bn won ($241m). That was up from 43bn won ($35m) last year. Asiana owes a total of 2.7 trillion won ($2.2bn) to financial institutions.
On the face of it, the 31% share is worth 387.4bn won ($319.5m) However, the Korea Herald reports that the deal could be worth as much as 2 trillion won ($1.6bn) including management premium, but is anyone interested?
Three bids received
Bidding for the carrier opened towards the end of July, but details have been slow in coming forward. However, yesterday it was revealed that at least three preliminary bids have been received.
The first of those bidders is Aekyung Group, who have been clear since the outset of their intentions to take over the struggling carrier. Aekyung operates the low cost airline Jeju Air, so is likely more interested in the packaged Air Seoul and Air Busan than in the full service airline itself. However, reporting in the Korean Times previously indicated that Aekyung is considered too small to be able to acquire Asiana.
The second bidder is a consortium, led by securities group Mirae Asset Daewoo. Mirae is partnering with HDC Hyundai Development, a business that operates duty-free stores and, according to Nikkei Asian Review ‘sees potential synergies’ with the airline.
The third and final bidder, so far, is an activist fund called Korea Corporate Governance Improvement (KGCI). While their bid is the strangest so far, it should be noted that they are the second largest shareholder (with a 16% share) in the parent company of Korean Air Lines. KGCI are reportedly bidding as part of a consortium, but the partners have not been listed.
Notably absent from the bidding were major Korean conglomerates SG, SK and Hanwha. Reuters reports that spokespeople for the companies said they are not interested in bidding. However, this could well be a ruse to avoid pushing the price up, with plenty of time left to submit a last minute offer.
What next for Asiana?
Although Asiana are in a troubled financial state, the airline is pressing on. However, the cracks are starting to show, as the airline cuts routes to major destinations and slims down its fleet to make savings. The airline has previously ditched first class and offered unpaid leave and early retirement to employees in a bid to cut costs.
In terms of the sale, Kumho Asiana are planning to complete the sale before the end of the year, and have previously said that a shortlist of bidders will be drawn up at some point this month. Final binding bids are to be received no later than November.
For Asiana, a decision can’t come fast enough.