Collapsed M&A deal adds to Asiana Airline`s woes while easing uncertainty for HDC

2020.09.14 12:53:51

[Graphics by Song Ji-yoon]이미지 확대

[Graphics by Song Ji-yoon]

Shares of Asiana Airlines Inc. went down while those of HDC Hyundai Development Co. gained after the high-profile M&A deal officially fell apart last Friday as the ongoing pandemic crisis darkens outlook of the airline industry.

As of 12:17 p.m. on Monday, shares of Asiana Airlines fell 2.09 percent to 3,980 won. Samsung Securities maintained its “Hold” opinion and target price at 3,500 won ($2.96) due to the minimized market shock on the widely-anticipated deal breakdown.

The nation’s second largest full-service carrier announced in a regulatory filing last Friday that Kumho Industrial officially notified the termination of the contract to sell its 30.77 percent stake in the airline to a consortium of HDC and Mirae Asset Daewoo for 2.5 trillion won. Immediately after the announcement, the Korean government pledged to provide 2.4 trillion won to Asiana Airlines from a state fund dedicated to project the country’s key industries from the COVID-19 crisis.

Kim Young-ho, an analyst from Samsung Securities, said the deal flop was widely expected because HDC had stubbornly demanded an additional due diligence as the outlook for the airline gets grimmer due to the ongoing pandemic crisis.

But he expected that despite the state’s 2.4-trillion won aid to the country’s second largest full-service carrier, the pandemic woes would continue to push the company closer to the edge for a while. Kim expected a 33 percent cut in revenue as well as operating loss for this year as both of the passenger and cargo demand would remain low for the rest of the year. He added that the airline could go through massive restructuring by its creditors before it is placed on the market for sale again.

Meanwhile, Samsung Securities revised upward its opinion on HDC from “Hold” to “Buy” and target price from 22,000 won to 30,500 won as the uncertainty on the planned acquisition of the debt-ridden air carrier has been eased.

Shares of HDC Hyundai Development grew 0.81 percent to 24,950 won as of 12:20 p.m. on Monday.

Baek Jae-seung from the brokerage said the 2.2 trillion won worth cash reserves accumulated for the planned acquisition of the airline in the first half could be used to strengthen its core real estate development, which could be good news for investors.

But there also could be some damages from the deal breakdown, he added, including the potential dispute with KDB on down payment it had already paid when they signed the deal in December last year.

By Song Gwang-sup and Choi Mira

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