[Asia Economy Reporter Inho Yoo] The merger and acquisition (M&A) process of Asiana Airlines by HDC Hyundai Development Company is progressing urgently.
Concerns over Asiana Airlines' massive losses due to the COVID-19 pandemic have increased the likelihood that HDC Hyundai Development will renegotiate the terms with KDB Industrial Bank.
According to industry sources on the 7th, HDC Hyundai Development recently received a consulting report from the global consulting firm McKinsey & Company regarding the Asiana Airlines M&A. McKinsey's report included a kind of post-merger integration (PMI) strategy, such as ways to create synergy from the Asiana Airlines M&A.
However, the industry believes that this report could be crucial for HDC Hyundai Development's final decision. Some claim that McKinsey conveyed that the aviation industry's downturn due to the COVID-19 crisis could also negatively impact the existing construction business. It is said that the report emphasized the negatives more than the positives.
Recent negative forecasts about Asiana Airlines' performance and future market conditions in the capital market also pose a burden for HDC Hyundai Development. Asiana Airlines is expected to report an earnings shock with losses exceeding 300 billion KRW in the first quarter alone this year. If the prolonged COVID-19 situation prevents a rebound, Asiana Airlines is reportedly facing inevitable losses exceeding 1 trillion KRW by the end of the year.
Additionally, there are concerns about the withdrawal of Mirae Asset Daewoo Securities, a participant in the consortium. Although it had planned to invest 489.9 billion KRW as a financial investor (FI) in Asiana Airlines, it is now speculated that it might pull out to secure liquidity in response to the recent global stock market crash.
Within the HDC Hyundai Development-Mirae Asset Daewoo consortium, opinions are reportedly divided between 'changing acquisition terms' and 'abandoning the acquisition.' An industry insider said, "Given the deteriorating conditions in the aviation industry, acquiring Asiana Airlines under the existing terms has become difficult," and predicted, "If Mirae Asset Daewoo, the FI, withdraws, HDC Hyundai Development will lose the strength to push forward with the acquisition."
Regarding this, Mirae Asset Daewoo denied such a possibility, stating, "Unless HDC Hyundai Development decides to abandon the acquisition first, there is no reason for us, as a simple FI, to withdraw first."
HDC Hyundai Development is also officially placing more weight on changing contract terms rather than abandoning the acquisition. In this regard, it is known that in mid-last month, HDC Hyundai Development Chairman Chung Mong-gyu met with KDB Industrial Bank Chairman Lee Dong-gull to discuss the acquisition of Asiana Airlines. The specific details of their conversation have not been disclosed.
However, it is reported that HDC Hyundai Development is renegotiating terms with KDB Industrial Bank behind the scenes. HDC Hyundai Development plans to invest about 2.5 trillion KRW, allocating 500 billion KRW for a 30% stake in Asiana Airlines, 1 trillion KRW for repaying KDB loans, and the remaining 1 trillion KRW for operating funds.
An HDC Hyundai Development official said, "We are continuing to pursue the Asiana Airlines M&A, and nothing has changed so far."
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