Korean Aerospace Industries (KAI) shareholder Hyundai Space & Aircraft has revealed that it is in talks with BAE Systems over a possible equity sale. Its two partners in KAI, the aerospace divisions of Samsung and Daewoo, see the move as threatening the restructuring process in South Korea.
Hyundai briefed KAI and Korean Government officials on the negotiations on 27 November, saying BAE is close to buying 51% of Hyundai Space & Aircraft, giving the UK company effective control of Hyundai's 33% stake in KAI. Sources close to KAI say the other partners knew nothing about the talks until the briefing. They see the move as potentially damaging.
Sealing the deal would give BAE a back door way into KAI. The UK company has been fighting a losing battle against a joint Lockheed Martin/Aerospatiale Matra team to be selected as a foreign direct investor (FDI) in KAI. Non-binding offers for this shareholding from a number of contenders are to be submitted on 13 December.
The US/French bid is favoured because Samsung, the most active of the local aerospace manufacturers, has a partnership with Lockheed Martin through its licensed production of F-16s and the KTX-2 advanced jet trainer development programme.
Flight International's sister on-line service, Air Transport Intelligence, quoted BAE as saying the Hyundai talks are pure speculation but that any potential partnership "would not affect our commitment and intention to be a direct investor in KAI".
UK industry sources, however, confirm negotiations are under way saying there is nothing to forbid separate talks with KAI shareholders, distinct from the FDI process.
Neither is there any reason why BAE should not pursue a much closer defence relationship with Hyundai. KAI allows its partners to continue as separate entities under their own names, pursuing some contracts individually.
Source: Flight International
