Who-will-take-overAsiana
Asiana airplane/Courtesy of Kumho Asiana Group

SK, Hanwha may purchase airline firm

Which company will take over Asiana Airlines, which is now up for sale after its owner Kumho Asiana Group gave in to the conglomerate’s main creditor, the Korea Development Bank? 

On the lips of observers are such groups as SK, Hanwha, and Aekyung. The estimated selling price is around $1 billion; but if Kumho sells off subsidiaries like Air Seoul and Air Busan along with the country’s No. 2 flag carrier in a package deal then the price is expected to be some $2 billion.

Both Air Seoul and Air Busan are low-cost carriers, with Asiana Airlines owning the former outright and having a 44.2 percent stake in the latter.

SK Group has gained weight through successful M&As. For example, the Seoul-based business empire snapped up SK hynix, the world’s second-largest memory chip maker, in 2012.

Back then, there was some opposition because the high-tech firm’s debt ratio was high. But Chairman Chey Tae-won forged ahead with the deal and SK hynix has become a cash cow for the group.

According to CEO Score, a domestic business consultancy, SK Group holds more than $85 billion in cash reserves; hence, it has the financial leeway to purchase Asiana if it wants to.

In the case of Hanwha, the group has tried to tap into the airline business to maximize synergy with its affiliates such as Hanwha Aerospace, which builds airplane engines, watchers point out.

Last year, Hanwha channeled almost $150 million in low-cost carrier Aero K. But the attempt fell apart as the latter failed to win a license.

CEO Score said that Hanwha has slightly more than $20 billion in cash reserves.

The final contender Aekyung Group already operates budget airline Jeju Air. Hence, it will be able to grow in size with Asiana. But experts question whether the group can afford to buy it.

As is usually the case for most M&A deals, however, they all refuse to confirm anything.

When contacted, an SK Group spokesman said that “SK has not reviewed the possibility of taking over Asiana.”

A Hanwha Group representative also flatly denied the rumors that the conglomerate was interested in a potential bid.

“When we channeled funds into the Aero K venture in the past, we were just a financial investor. In addition, Hanwha Aerospace’s engine business is related to airplane manufacturing, not airline companies,” he said.

In the face of snowballing debts, Kumho Asiana Group asked for additional funds from the KDB, which instead urged the group to dispose of Asiana Airlines. Kumho accepted the demand from the state-run lender.

 

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