Korean Air to change articles of association for Asiana takeover
SEOUL, Korean Air Lines Co., South Korea’s biggest carrier, said Tuesday it will change its articles of association to help finance its planned acquisition of smaller rival Asiana Airlines Inc.
Korean Air will hold an extraordinary shareholders’ meeting on Wednesday to amend its articles of association ahead of its 2.5 trillion-won (US$2.3 billion) rights issue plan for March to sell more stocks aimed at funding the acquisition, a company spokeswoman said over the phone.
The national flag carrier plans to preemptively raise the number of shares to 700 million from the current 250 million before the share sale, she said.
Out of the rights issue proceeds, Korean Air plans to spend 1.8 trillion won to take over Asiana, the country’s second-biggest carrier.
The company began conducting due diligence on Asiana early last month to look into Asiana’s cost structure, contracts and other details as it is scheduled to come up with a post-merger integration plan by March 17, Korean Air President Woo Kee-hong said last month.
To proceed with the deal, Korean Air plans to submit documents to antitrust authorities in the countries to which the carrier flies by Jan. 14 for review of the merger.
The countries include the United States, the European Union, China and Japan.
Korean Air expects no major problems in obtaining approval from overseas for the merger of the two airlines given that bigger merger deals went smoothly in the past.
Korean Air and Asiana account for a combined 40 percent of passenger and cargo slots at Incheon International Airport, South Korea’s main gateway. It does not constitute a monopoly, the company said.
The two airlines have suspended most of their flights on international routes since March as countries strengthen their entry restrictions to stem the spread of the pandemic.
From January to September, Korean Air’s net losses narrowed to 651.84 billion won from 707.14 billion won a year earlier as it focused on winning more cargo deals to offset dried-up travel demand.
But Asiana’s net losses widened to 624 billion won in the first nine months from 524 billion won a year ago.
The carriers are expected to release their fourth-quarter and 2020 earnings results next month.
Meanwhile, the National Pension Service (NPS), the country’s largest institutional investor, earlier in the day decided to vote against the carrier’s share sale plan.
The NPS, the second-largest shareholder in the airline with an 8.11 percent stake, said Korean Air signed a deal to acquire the debt-laden Asiana without conducting proper due diligence, which may hurt Korean Air shareholders’ value.
But the state pension fund’s objection alone is widely expected to not be a drag on Korean Air’s plan to change its articles of association given Korean Air parent Hanjin KAL Corp. and related parties collectively hold a 31.13 percent stake in the carrier.
Source: Yonhap News Agency