Harim's Vision as an Integrated Logistics Company in Land, Maritime, and Air Transport ... Secures 800 Billion KRW
Ssangbangwool Utilizes Entertainment Business ... Former CEO Kim Jeong-sik Appointed as Promotion Committee Chairman
[Asia Economy Reporter Jo In-kyung] The competition between Harim, the top domestic meat processing company, and Ssangbangwool, a native underwear company, is fierce in the off-market bidding for the acquisition of Eastar Jet, which is undergoing corporate rehabilitation procedures. As both companies face growth limits in their core businesses, they have taken a bold step to open new growth avenues through acquiring an airline.
From Poultry Business to Logistics
Harim Group submitted a letter of intent (LOI) for the preliminary bidding of Eastar Jet through its subsidiary, bulk shipping company Pan Ocean. The plan is to maximize the logistics sector by combining shipping and aviation industries if they acquire Eastar Jet. Adding the urban high-tech logistics complex currently being promoted in Yangjae-dong, Seoul, they envision transforming into a comprehensive logistics company equipped with land, sea, and air logistics capabilities.
Harim is the largest company in the domestic chicken market, focusing on broiler processed food production as its main business. However, the chicken market is highly competitive to the point of losses despite high sales, and external factors such as avian influenza (AI) cause business volatility, making continuous growth difficult to expect. Therefore, by combining Harim’s existing land logistics with Pan Ocean’s sea logistics and Eastar Jet’s air logistics, they present a vision of becoming a comprehensive logistics company.
Harim Chairman Kim Hong-guk recently stated, "If we succeed in acquiring Eastar Jet, the synergy effect is expected as air logistics will be added to Pan Ocean’s existing sea logistics, completing a land-sea-air logistics portfolio," and added, "We have also secured sufficient funds for acquisition and future business." Pan Ocean, which operates bulk shipping transporting iron ore, coal, and grain, held net cash of about 190 billion KRW as of the end of last year. The group explained that they have already secured 700 to 800 billion KRW in funds independently.
Flying into the Chinese Market
Within Ssangbangwool Group, Kwanglim, the top domestic crane and special vehicle company, is leading the acquisition efforts by forming a consortium with semiconductor equipment company Mirae Industry and entertainment company IOK.
Eastar Jet holds the most routes to China among domestic low-cost carriers (LCCs), with 12 routes and secured slots at local airports. Ssangbangwool plans to diversify the businesses of its affiliates through this and promote expansion into the Chinese market.
The flagship underwear brands Ssangbangwool and Vivian are preparing to target the approximately 74 trillion KRW Chinese underwear market. Especially, they plan to actively utilize IOK’s content production and management business, including movies and dramas, and music business centered on singer 'B.I' to promote their brands along with 'K-content.' Once flights resume, they aim to rapidly increase brand awareness through aircraft exterior wrapping advertisements featuring popular celebrities and in-flight video ads. Currently, renowned celebrities such as Jang Yoon-jung, Go Hyun-jung, Jo In-sung, Lee Young-ja, and Kim Sook are affiliated with IOK.
The company also explained that securing funds for acquiring Eastar Jet is not an issue, having attracted financial investors (FIs) early on. Ssangbangwool appointed former Eastar Jet CEO Kim Jeong-sik as the acquisition promotion chairman. Kim, who took office as Eastar Jet CEO at the end of 2013, successfully turned the company from a perennial deficit to a profitable business during his tenure. If the acquisition succeeds, they expect stable and swift management normalization centered on Chairman Kim.
Bidding on the 14th, 'Stalking Horse' Method
Eastar Jet is currently conducting preliminary due diligence on bidders who submitted LOIs and plans to receive bidding documents with sale prices on the 14th.
This sale uses the 'Stalking Horse' method, where a conditional preferred bidder exists. Even if bidders like Harim and Ssangbangwool propose certain prices, the preferred bidder has the right to match the offer and secure acquisition priority.
Post-acquisition, more funds than the purchase price may be required to normalize Eastar Jet. Currently, Eastar Jet’s passenger operations are temporarily suspended, and its debt continues to increase. As of the end of Q1 last year, its total equity was -104.2 billion KRW. The acquiring company must first invest over 100 billion KRW to resolve capital erosion. Additionally, among Eastar Jet’s 200 billion KRW debt, the highest priority repayment items such as employee salaries and taxes amount to about 85 billion KRW.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
