S.Korean activist fund KCGI eyes Asiana Airlines stake, shares soar (updated)
19/08/2019 09:52
* KCGI is No.2 shareholder of parent of Korean Air Lines
* KCGI CEO says local airline industry needs restructuring
* S.Korea's No.2 airline up for sale, initial bids on Sept.
3
* Asiana shares jump as much as 26%, end up 11%
(Recasts with Asiana share price, adds other details)
By Hyunjoo Jin
SEOUL, Aug 19 (Reuters) - South Korea's activist fund KCGI,
the second-largest shareholder in the parent company of Korean
Air Lines Co Ltd 003490.KS , said it was looking to buy a
controlling stake in Asiana Airlines 020560.KS , helping send
shares of the carrier up 26%.
KCGI Chief Executive Kang Sung-boo said the fund is in talks
with several local and overseas entities to form a consortium to
bid for the 31.05% stake in Asiana Airlines, which has been put
up for sale by top shareholder Kumho Industrial 002990.KS .
The stake was worth $282 million at Friday's close.
Kang's comment comes as the local airline industry grapples
with several challenges, including rising competition from
budget carriers, a U.S.-China trade war hitting cargo demand and
a Korea-Japan diplomatic row hurting travel.
Korean Air Lines and Asiana Airlines swung to operating
losses for the April-to-June quarter, from a year earlier.
Asiana Airlines is expected to receive initial bids on Sept.
3, followed by binding bids in October, Kang said.
Credit Suisse is managing the deal.
An Asiana spokesman declined to comment.
Kang said the country's full-fledged carriers need to
restructure and consolidate to reduce competition and heavy
debts. "I believe the entire airline industry in Korea is in
crisis," Kang told Reuters over the phone.
Shares of Asiana Airlines, South Korea's second-largest
carrier after Korean Air Lines, ended up 11% after jumping as
much as 26% during trade. Its budget airline affiliate Air Busan
ended up 26%, in a broader market .KS11 that was up 0.7%.
Analysts said shares of the affiliate were also buoyed by
the possibility that creditors could look to sell stakes in
Asiana Airlines separately from other assets like Air Busan
298690.KS .
Asiana's total debt was at 9.6 trillion won ($8 billion) as
of end-June, versus 7.1 trillion won as of end-2018. The
carrier's market value is at about $1 billion.
FUNDING QUESTIONS
There are doubts whether KCGI has the financial capability
to bankroll the deal, and even if it does, whether Asiana's
creditors would be comfortable with the sale to a fund with
little experience in the airline industry, analysts said.
KCGI has hiked its stake in Hanjin Kal, the parent of Korean
Air Lines, fueling market expectations about a battle to control
the family-owned group following the death of patriarch Cho
Yang-ho in April.
But Delta Air Lines DAL.N , which runs a joint venture of
Korean Air Lines, bought a 5.13% stake in Hanjin Kal, giving a
boost to the management of South Korea's top carrier as it seeks
to thwart KCGI's challenge. urn:newsml:reuters.com:*:nS6N23R00F urn:newsml:reuters.com:*:nL2N23R0MO
Kumho has been looking to offload its stake in the
debt-laden Asiana, after the conglomerate came under pressure
from Asiana's creditors including state-run Korea Development
Bank.
South Korea's chip-to-refinery conglomerate SK Group and
retail-focused Aekyung Group, which also has a stake in budget
carrier Jeju Air 089590.KS , were named as potential suitors
for Asiana by local media, but the two firms did not publicly
say whether they were interested in the bidding or not.
($1 = 1,209 won)
(Reporting by Hyunjoo Jin; Editing by Shri Navaratnam and
Himani Sarkar)
((hyunjoo.jin@thomsonreuters.com; 82-2-3704-5685; Reuters
Messaging: hyunjoo.jin.thomsonreuters.com@reuters.net))