April 19, 2024

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Aekyung Group, which offers consumer goods to low-cost carriers, appears to be joining the race to buy Asiana Airlines, according to market watchers on May 29.

“We’ve been mulling the idea (of acquiring Asiana Airlines) since Kumho Asiana Group Chairman Park Sam-koo announced the sale,” an official at the group said. “But at this point, we’re just reviewing it and nothing has been decided yet.” 

Industry sources said Aekyung is very close to appointing Samsung Securities as the deal manager.

Kumho Industrial, the largest shareholder, announced the sale of 33.5 percent stake in Asiana on April 15 in a desperate move to overcome a liquidity crisis.

By acquiring the airline, Aekyung, the 58th largest company in South Korea, can boost its fast growing airline business and also its stature as a conglomerate.

Aekyung owns Jeju Airline, the No. 1 LCC with 40 flights. By acquiring Asiana, it can add long-haul fleet to its operations and immediately become an archrival of Korean Air, the nation’s largest flagship airline. 

However, challenges remain for Aekyung.

To acquire the nation’s second-largest flagship airline, Aekyung needs up to 2 trillion won ($1.67 billion) to buy the stake plus management rights. In addition, the deal comes with the airline’s debt worth 7 trillion won. This could hurt the financial soundness of the group as the debt level of AK Holdings would increase from 131 percent to 351 percent.

“Aekyung’s financial resources are limited compared with those of SK and CJ groups. So it might form a consortium with financial investors for the deal,” an industry source said.

Kumho Industrial said it plans to complete the sale within this year. Ernst & Young Hanyoung is currently conducting due diligence, a process expected to be concluded by end-June. Credit Suisse, tapped to manage the deal, then will send out an information memorandum.

Other conglomerates such as SK, Hanwha, Lotte, CJ and Shinsegae groups were considered as potential buyers. But the first three have said they have no interest in the troubled airline.

By Park Ga-young (gypark@heraldcorp.com)