KCGI "Acquisition of Asiana Airlines is like Chairman Cho Won-tae defending management rights with the people's tax money"

[Asia Economy Reporter Minji Lee] KCGI, an activist private equity fund (PEF) that has been in conflict with Chairman Cho Won-tae over the management rights of Hanjin Group, strongly criticized Hanjin Group's acquisition of Asiana Airlines, calling it a defense of Chairman Cho Won-tae's management rights using the people's tax money.

On the 17th, KCGI stated in a press release, "Chairman Cho Won-tae holds only 6% of Hanjin KAL shares and without investing a single won, he is solidifying his management rights through massive tax money injection via the Korea Development Bank and the sacrifice of shareholders," adding, "The management of the Korea Development Bank is actively stepping in with Cho Won-tae's friendly shares in exchange for resolving the sale issue of Asiana Airlines."

[Image source=Yonhap News]

KCGI claimed that the Korea Development Bank carried out abnormal financing and unprecedented advance disbursement of funds to defend Chairman Cho Won-tae's management rights. KCGI said, "The announced amount of financing could be sufficiently raised by selling just one or two buildings owned by Hanjin Group or through capital increases by existing shareholders," and criticized, "The distorted structure involving the Korea Development Bank's forced third-party allotment capital increase and exchangeable bond (EB) subscription, funded by taxpayers' money, can only be interpreted as a means to defend Chairman Cho Won-tae's management rights." They added that there is no precedent for the Korea Development Bank injecting funds before procedures such as corporate merger notifications for the acquisition have even begun.

Regarding the 6% stake pledged as collateral by Chairman Cho Won-tae to the Korea Development Bank, KCGI explained that it is effectively subordinated and lacks practical effectiveness. KCGI stated, "It has already been pledged as collateral to financial institutions and is collateral for the fulfillment of the merger and acquisition contract, not for management responsibility, so it is meaningless."

Furthermore, KCGI emphasized, "Although mergers and acquisitions of airlines require proper due diligence, valuation, and negotiation of transaction terms, the procedures and sufficient discussions were ignored for Asiana Airlines, which has 12 trillion won in debt and is in a state of capital erosion," and stressed, "Hanjin Group's acquisition of Asiana Airlines will only result in Chairman Cho Won-tae, a 6% shareholder, securing an additional 10% friendly stake through the people's tax money, sacrificing other shareholders."