Asiana Airlines’ share price soared over the daily limit of 30 percent to end at 7,280 won ($6.41) on April 15 following news that its largest shareholder, Kumho Industrial, had decided to sell off the airline to fight a cash crunch.
Along with the airline, other affiliates of Kumho Asiana Group began to see their stock prices jump in morning trading amid related rumors. In the early afternoon, the company confirmed that the board of directors at Kumho Industrial had voted to offload the country’s second-largest air carrier to normalize its business operations. “Selling Asiana Airlines is the best way for both the airline and the group to recover the trust of the market,” Kumho said in a statement.
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The move came four days after the company’s creditors, including the state-run Korea Development Bank, refused to provide an additional 500 billion won ($440 million) in financial assistance.
In its self-rescue plan, the group had pledged to sell off the airline if it failed to meet creditors’ demands in three years. But the creditors balked at the proposal, saying it was not sufficient to restore market confidence.
By selling its flagship unit, Kumho Asiana Group -- once the country’s seventh-largest conglomerate -- has dropped to below 60th place. The airline accounts for more than 60 percent of its sales and assets, meaning the group’s assets will shrink from 11.5 trillion won to 4 trillion won.
The group carried out aggressive expansion in the mid-2000s, during which it bought Daewoo E&C in 2006 and Korea Express in 2008. The deals turned out to be toxic moves, and the group was put under the control of creditors including KDB due to a severe cash crunch triggered by the Daewoo E&C deal.
Market watchers said the air carrier could attract major conglomerates such as SK Group, Hanhwa Aekyung, CJ, Shinsegae and Lotte as potential buyers.
“The buyer would have to pay for the 33.5 percent stake held by Kumho Industrial worth 385.7 billion won and premium for management rights. In addition, it has to solve 1.27 trillion won loans due this year to normalize Asiana Airlines,” Bang Min-jin, an analyst at Eugene Investment and Securities, said.
By Park Ga-young (firstname.lastname@example.org)