Asiana Airlines shares take a roller-coaster ride on buyout rumors
[THE INVESTOR] Shares of Asiana Airlines, the nation’s second-largest air carrier still reeling from the recent no-meal fiasco, took a roller-coaster ride on July 17 following a news report that SK Group was considering acquiring the firm.
The stock price soared more than 22 percent at one point but tumbled immediately after SK flatly denied the report in a regulatory filing. The price closed at 4,300 won (US$3.80), up 2 percent from the previous day.
Individual investors purchased a combined 13.6 billion won shares, while foreigners and institutions sold off shares worth 7.5 billion won and 5.7 billion won, respectively. On July 18, the price extended a fall to close at 4,245, down 1.28 percent. Individuals are believed to have seen huge losses.
Earlier on the day, a local media outlet reported that SK recently offered its intention to acquire Asiana, an affiliate of Kumho Asiana Group, and the plans were discussed at the Supex council, the group’s top decision-making body.
Asiana-affiliated Jeju Air’s former CEO Choi Kyu-nam’s recent appointment to the council also fueled the speculation. SK said his joining was part of its mergers and acquisitions push and had nothing to do with its possible entry into the airline business.
SK Chairman Chey Tae-won also denied the report in a separate industry meeting later on the day, saying, “I have no interest in the aviation industry.”
The buyout rumors spread fast here as Asiana is under growing pressure to pay back its maturing debts. This year alone debts of 395 billion won will mature. Kumho plans to secure cash by selling off its headquarters building in Seoul.
It is still unlikely for Kumho to give up its flagship unit considering the burgeoning tourism market, not to mention the symbolic meaning of the business that was launched by its founder.
“Asiana’s cash flow seems enough to pay back the maturing debts,” Kang Seong-jin, an analyst at KB Securities. “The recent governance issues will have a limited impact on management rights.”
But he added a possible ownership change could help elevate Asiana’s stock price that has been hit hard by the unprecedented food shortage in flights, the management’s lax handling of the crisis and other shady allegations about the firm and the owner family.
“Its possible buyout will help it repay debts and the reduced interest costs will affect the stock price positively,” Kang said.
If Asiana is put up for sale, industry watchers say, one of the potent bidders is SK. The nation’s third-largest conglomerate has nurtured its business through aggressive buyouts over the past decades. The group also reportedly sought to acquire Kumho Tire, a sister firm of Asiana, and its Chinese plant for about 700 billion won last year.
By Lee Ji-yoon (firstname.lastname@example.org)