A view of Asiana Airlines headquarters in Gangseo-gu, Seoul. (Photo: Asiana Airlines)

The consortium of Hyundai Development Co. (HDC) and Mirae Asset Daewoo has been selected as the preferred bidder to take over Asiana Airlines. Kumho Industrial Co. announced Nov. 13 that the HDC-led consortium has been named as the preferred bidder to acquire Korea’s No. 2 full-service carrier, Asiana Airlines.

“Of three consortiums that submitted final bids for the Asiana stake, the HDC-Mirae Asset consortium was seen as the best buyer to put Asiana’s business back on track and secure its mid and long-term competitiveness,” a Kumho Industrial official said, adding they will sign sales and purchase agreement by the end of this year.

As the preferred bidder, HDC said it wants to wrap up the upcoming negotiations well and build Asiana as one of the most competitive carriers. “

HDC will create positive synergy with Asiana’s employees,” HDC Chairman Chung Mong-gyu said in a press conference.

“The acquisition of Asiana fits HDC Group’s sustainable business growth strategy. We will do our best to make sure the agreement is achieved smoothly and will support Asiana Airlines to have the best competitiveness after the agreement,” Chung said.

Chairman Chung Mong-gyu of Hyundai Development Company. (Photo: HDC)

“Asiana will have the highest-level financial solidity in the aviation industry. After the acquisition, we will continue to invest in new aircraft and service sectors so that it can have higher competitiveness and brand value as a premier airline,” Chung said.

“Since safety is the top priority, it will become an airline where safety is the top priority.” Chung said he will not change the name Asiana Airlines for now, as it has a good brand value.

The HDC-Mirae Asset consortium beat out two competing consortiums - one set up between Aekyung Group and Sone Bridge Capital, and another consortium between the Korea Corporate Governance Improvement (KCGI) and BankerStreet private equity funds.

In a preliminary bid, the HDC consortium reportedly suggested around 2.5 trillion won for the acquisition, which was about 1 trillion higher than the bid suggested by Aekyung Group and the KCGI consortium.

Meanwhile, as the preferred bidder has been chosen, Kumho Industrial will begin negotiations to complete the sale of Asiana by the end of the year.

Kumho Industrial and the HDC consortium are expected to have a fierce battle over the acquisition price of Asiana Airlines.

The latest megadeal involves HDC purchasing 31 percent of Kumho Industrial’s stake in Asiana, or some 68.6 million shares - called “old shares” - worth some 400 billion won as of earlier this month. This does not include a premium for the administrative rights.

It also involves HDC purchase of new shares to be issued by the airline, so that all proceeds from the sales flow to Kumho Group to rebuild the group’s finances.

As of the end of the first half of this year, Asiana’s total debt stood at 9.6 trillion won.

Market insiders have questioned the company’s funding power, as the air carrier’s huge debt and unstable cash flow may be difficult for HDC to shoulder alone.

Commenting that HDC had the financial capability to acquire Asiana alone, Chung decided to team up with Mirae Asset and its founder, Park Hyeon-joo, “to learn from the insight of Chairman Park, who has carried out various mergers and acquisitions.”