Hyundai Development Co., a major Korean real estate development & construction company, signed a deal on Friday acquiring Asiana Airlines Inc. The South Korean builder strives to expand and diversify its business portfolio.
HDC and Kumho Industrial Co., in a board meeting held on Friday, approved the deal. Kumho Industrial Co. is a construction subsidiary of Kumho Asiana Group.
The agreement came after the consortium created between HDC and Mirae Asset Daewoo, which was chosen as the preferred bidder in November, acquiring a 30.77 percent share in Asiana held by Kumho industrial. New shares will also be issued with the airline’s six affiliates for 2.5 trillion won ($2.2 billion).
HDC Chairman Chung Mong-gyu said, “We will immediately jump into the process to take over Asiana Airlines to (financially) stabilize the company and turn it into a top-tier air carrier in terms of safety.”
The company seeks to generate a win-win situation with Asiana in several business fields, Chung said, without further explaining.
HDC plans to invest 2.177 trillion won ($1.875 billion) in new Asiana stakes to be issued by the airlines to aid in improving the airline’s financial status. The investment will focus on advancing profitability by enhancing cost-effectiveness and streamlining routes.
The development company expects capital injection to help lessen the airline’s debt-to-equity ratio from 660 percent to 300 percent.
HDC stated that it would buy the existing 68.69 million Asiana stocks at 4,700 won ($4.05) per share totaling 322.8 billion won ($278 million).
Kumho Industrial said the company plans to use the money to repay the debt it loaned from the state-owned Korea Development Bank and other domestic lenders.
In the agreement, Kumho Industrial also agreed to be responsible for any taxes and possible contingent liabilities of Asiana Airlines amounting to 9.9 percent after the acquisition.
The 31 percent share was valued at 365 billion won ($314 million) with a closing price of 5,310 won ($4.57) as of November 7 when the consortia submitted closing bids to Credit Suisse, the deal’s lead manager.
HDC seeks to complete the overall acquisition process by April 2020. The company expects to own a 61.5 percent share in Asiana Airlines after the issuance of shares, with Mirae Asse Daewoo set to acquire a 15 percent stake in the airlines.