Hanjin Group will likely conduct due diligence on Asiana Airlines after signing a deal to buy the firm through Korean Air in a bid to speed up the process, industry sources said.

This clearly deviates from typical mergers and acquisitions, in which a buyer enters into negotiations with a seller before striking a deal, based on the results of due diligence.

Hanjin Group’s planned takeover of Asiana, which is under the control of its largest creditor Korea Development Bank (KDB), was announced on Monday (November 16). The announcement came only two months after KDB and Hanjin started discussions.

Although no agreement has been officially signed, the terms have already been agreed. However, it was made without due diligence on Asiana, which could draw objections from Hanjin stakeholders, including creditors and shareholders, observers said.

To help finance the deal, KDB will invest a total of 800 billion won ($717.7 million) in Hanjin KAL, the conglomerate’s holding company, which will then inject the money into its subsidiary Korean Air.

A coalition of the group founder’s daughter Cho Hyun-ah, activist fund KCGI and Bando Engineering & Construction said in a recent statement that Hanjin Group’s takeover of debt-ridden Asiana Airlines would mean using “taxpayers’ money without proper due diligence and discussions”, and would only benefit chairman Cho Won-tae “at the expense of a majority of other shareholders”.

The coalition is the largest shareholder in Hanjin KAL, with a 46.71% stake. Locked in a struggle with Cho Won-tae for control of the conglomerate, it has criticized KDB for playing the role of a white knight in the company’s management. KDB would hold a stake of about 10% in Hanjin KAL after the equity investment.

Korean Air will likely conduct due diligence after the deal is signed, but this could be seen as a mere formality, industry watchers said. In another deal led by KDB, Hyundai Heavy Industries conducted due diligence on Daewoo Shipbuilding & Marine Engineering shortly after it struck a deal to purchase the ailing shipbuilder in 2019.

“It is unlikely that terms agreed between Hanjin and KDB will be renegotiated after due diligence,” an industry insider said. (Reporting by Hee-yeon Han)

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