Chairman Hyung Nam-soon Swiftly Decides on Eastar Air Acquisition

Opportunity to Fulfill the Long-Held Dream of a 'Proper Airline'

Hyung Nam-soon, Chairman of Sungjung Co., Ltd.

[Asia Economy Reporter Dongwoo Lee] With Sungjeong Co., Ltd. virtually confirmed as the new owner of Eastar Jet, the company's owner, Chairman Hyung Nam-soon, is drawing attention from the business community. Although Chairman Hyung is an unfamiliar name in the broader business world, he is a well-known entrepreneur in the Chungnam region and has long dreamed of entering the aviation industry. When signing a stalking horse (a method where a right of first refusal is granted followed by a separate public competitive bidding) contract with Delight Anjin, the sales agent, earlier last month, he strongly expressed his ambition to enter the aviation industry, saying, "I want to build a proper airline."

According to the aviation industry on the 18th, the court began reviewing the exercise of the right of first refusal and the funding plan notified through Delight Anjin, the sales agent for Eastar Jet, the day before. Sungjeong is reported to have raised the acquisition price to the level of the bid price submitted by the Ssangbangwool-Kwanglim consortium, which participated in the main bidding.

Prior to this, Chairman Hyung of Sungjeong, selected as the right of first refusal holder for Eastar Jet, expressed his intention to sign the contract two days after discussing the stalking horse contract method with Delight Anjin earlier last month. The industry evaluated that it was very unusual for Sungjeong to promptly pay a contract deposit of around 10 billion KRW, given that the acquisition price for Eastar Jet was reportedly around 100 billion KRW.

A senior industry official who participated in the contract at the time said, "In a situation where the bidding would have to switch to a general auction if no stalking horse appeared, Chairman Hyung announced his intention to acquire within two days of discussions," adding, "Everyone was surprised by this news, and Delight Anjin, the sales agent, even mentioned that they needed to confirm the funding capability." Delight Anjin thoroughly examined the funding capacity before obtaining approval from the Seoul Bankruptcy Court to sign the stalking horse contract with Sungjeong.

Chairman Hyung is not well known in the business world, but Sungjeong and its affiliates, including Daeguk Construction Industry and Baekje Country Club, are famous profitable companies in the Chungnam region. Last year, Sungjeong recorded sales of 5.9 billion KRW with an operating profit of 500 million KRW, and Baekje Country Club had sales of 30.6 billion KRW with an operating profit of 5.9 billion KRW. Although the scale is small, their financial mobilization capacity, including real estate, is said to be considerable.

Chairman Hyung decided to acquire Eastar Jet because he has steadily shown interest in entering the aviation industry over the past few years. He had previously invested some funds in establishing Eastar Jet in 2006. However, due to a temporary shortage of funds caused by overlapping schedules with construction at Baekje Country Club, he had to give up. Last year, he also showed active interest in acquiring T'way Air.

Regarding the acquisition of Eastar Jet, Chairman Hyung stated, "After witnessing the difficult situation of the employees, I decided to acquire the company with the thought of making Eastar Jet a proper airline."

Furthermore, through exercising the right of first refusal, Sungjeong is expected to pay a termination compensation (topping fee) to the Ssangbangwool Group. The industry generally knows the termination compensation to be about 3% of the acquisition amount, but the specific amount is expected to be around 1 billion KRW.