NICHOLAS IONIDES / JEJU
Korean Air (KAL) says it has secured tentative commitments from foreign groups interested in putting up to $300 million into Korea Aerospace Industries (KAI) after the airline completes its planned take-over of the country's dominant manufacturing company.
In August KAL signed an agreement with Daewoo Heavy Industries & Machinery covering the purchase of its 28.1% stake in KAI for up to 130 billion won ($113 million). The two other 28.1% shareholders, Hyundai and Samsung, also tentatively agreed to issue new KAI shares to KAL, enabling the airline to control more than 50% and giving it management rights. Creditors currently own around 15%.
KAL - which has its own in-house manufacturing division, KAL Aerospace - has since encountered vehement opposition from KAI employees, while there were initial difficulties in follow-on negotiations with Hyundai and Samsung.
But KAL Aerospace president Suh Sang-mook says all is now proceeding smoothly in talks with KAI shareholders. Memoranda of understanding should be converted into contracts by early November. This will be followed by six to eight weeks of due diligence, allowing for the deals to formally close by the end of the year.
Suh says KAL is already working to bring foreign funds into KAI and this could lead to a $200-300 million injection from abroad.
"There are a couple of companies - big companies - which want to invest in KAI if Korean Air takes the leadership of the company," says Suh. "Whether it is a partner in some way or real ownership I cannot say today, "he adds.
KAI was formed in 1999 through the merger of parts of the aerospace divisions of Daewoo, Hyundai and Samsung, but KAL refused at the time to fold its financially stronger KAL Aerospace unit into it.
The three main shareholders also tried to bring foreign companies in to take up to 35% and in May 1999 a consortium of BAE Systems and Boeing was selected as preferred investment partner, but the talks later collapsed.
Source: Flight International
