NICHOLAS IONIDES / SINGAPORE
Korea Aerospace Industries shareholders vote for last-minute change in regulations governing share acquisition
Korean Air (KAL) has stalled in its plan to take over manufacturer Korea Aerospace Industries (KAI), with a move by some shareholders that could block the deal.
Late in August, KAL signed a memorandum of understanding with 28% KAI shareholder Daewoo Heavy Industries & Machinery covering the purchase of its entire stake in the company.
KAL said at the time that it expected KAI shareholders to agree to issue new shares to it in a related deal, lifting its stake to more than 50%, and giving it management control. KAL does not own any shares in KAI.
But on 16 September KAI's other shareholders approved a revision to the company's bylaws that could block any take-over. Industry sources say these shareholders fear the value of their stakes in the business will fall after KAL gets involved, and there is speculation the changes were made as a negotiating ploy to inflate the still-undetermined price KAL would pay for the new shares.
The sources say the company's new bylaws require two-thirds of its shareholders to approve a new share issue. Hyundai and Samsung also each own around 28% of KAI, and a group of creditors holds about 15%.
Under its memorandum of understanding with Daewoo, KAL will purchase the initial 28% stake in KAI for around 129 billion won ($110 million), although the final price will depend on the outcome of due diligence.
KAL says it is still focused on taking over KAI despite the moves by shareholders that could block it.
"We expected there would be several obstacles. This is the case with everything," says the airline. "We will still pursue this takeover of KAI as planned."
KAL is unusual as an airline in that it has an in-house aerospace manufacturing division known as KAL Aerospace. It makes parts for Airbus and Boeing aircraft as well as for US and South Korean military aircraft, in addition to performing maintenance work on military aircraft.
Source: Flight International
