Korean Air Moving to Buy Korea Aerospace
By Bradley Perrett
Korean Air is close to taking over Korea Aerospace Industries, consolidating the country’s aircraft-building sector into a single company.
The airline, which has its own aerospace division, has long expressed an interest in buying its rival, and almost stitched up a deal to do so in 2003. Since major shareholders of Korea Aerospace are now willing to sell, a takeover looks likely – but not inevitable. Management, labor and political opposition could yet get in the way.
EADS is also interested in buying into Korea Aerospace, according to the Maeil Business newspaper. A bid by EADS would be surprising, however, since the company is trying to preserve cash, has ruled out major acquisitions and, in any case, has been focused on expanding its U.S. presence.
The prospective disposal of the aerospace manufacturer, builder of the T-50 supersonic trainer and derivatives, has arisen partly because of the South Korean government’s keenness for the sale of state assets.
The government’s Korea Development Bank owns 30.54% of the aerospace manufacturer and wants to sell. Of the other three major shareholders, Doosan Infracore, says it is willing to sell and another says it will consider offers.
Disposal of companies owned by or linked to the state is a top policy priority of President Lee Myung-bak, a strong believer in market efficiency. So the Korea Development Bank, itself to be privatized, is under great pressure from the government to sell as many of its corporate share-holdings as possible.
Korean Air chairman Cho Yangho said on March 12 that his company would be interested in buying the stakes held by Doosan and the bank.
Korean Air’s parent, Hanjin Group, could act as the buyer on the airline’s behalf.
The prospective disposal of Korea Aerospace is raising objections, however. A few opposition lawmakers are calling for the company to be left alone, at least until Singapore decides between the T-50 and Alenia Aermacchi M346 late this year.
The takeover could yet brew into a major political dispute, which would make it less likely to go ahead.
Moreover, the Korea Aerospace trade union is very much opposed to a takeover by Korean Air. A thousand of its members protested in front of the Korea Development Bank headquarters building in Seoul on April 20.
Photo: Lockheed Martin
