Korea Development Bank (KDB) will sell cash-strapped Asiana Airlines to Hanjin KAL, the holding company of Hanjin Group, triggering a new phase in the battle between family members for control of the South Korean conglomerate.

The state-run lender, which is the largest creditor of Asiana Airlines, announced on Monday (November 16) that it will buy 500 billion won ($450 million) of new shares and 300 billion won ($270 million) of exchangeable bonds issued by Hanjin KAL, the parent of Korean Air, confirming rumors that have been circulating for the last few days.

Proceeds will be used for the acquisition of rival Asiana Airlines, which would create the country’s largest national airline. This deal would also allow KDB to become Hanjin KAL’s third largest shareholder after Grace Holdings and Delta Air Lines.

Grace Holdings is a special purpose entity formed by activist manager KCGI, which is allied with Bando Engineering & Construction and Cho Hyun-ah, the daughter of Hanjin Group’s founder and late chairman Cho Yang-ho, in building a stake in Hanjin KAL. Meanwhile, Delta Air Lines is on the side of Cho Won-tae, Cho Yang-ho’s only son and the current chairman of the conglomerate.

The alliance of KCGI, Bando and Cho Hyun-ah has been caught off guard by the KDB’s announcement, industry watchers said. Any new shares issue would dilute their own stakes and enable KDB, which is apparently supporting Cho Won-tae, to play a key role in making corporate decisions, with neither of the two shareholding groups having the dominant voting power. The deal could also increase volatility in Hanjin KAL’s stock price, which would have a negative impact on KCGI’s exit plans.

Grace Holdings held a 46.71% stake in Hanjin KAL in the latest regulatory filings, while a group of shareholders led by Cho Won-tae, including Delta, his mother Lee Myung-hee and his other sister Cho Hyun-min, together owned 41.14% of the holding company.

KCGI, Bando and Cho Hyun-ah will likely move fast to convene a special shareholder meeting to appoint their picks as board members of Hanjin KAL to try and prevent the deal, industry watchers said. New share issues are subject to the board’s approval.

“It is our responsibility as the largest shareholder of Hanjin KAL to prevent the company from making wrong decisions,” an official from the alliance said.

The alliance may also counteract by filing for a court injunction to stop the shares being issued, observers noted.

“It will take at least two to three weeks to hold a shareholder meeting,” said an official at one law firm in Seoul. “Buying time by filing for a court injunction would only be temporary, especially if the deal gains momentum.” (Reporting by Ik-hwan Choi)

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