Korean Air clears hurdle for Asiana takeover

Changes corporate mandate to bankroll the deal via new stock issue

A photo of a Korean Air plane (Korean Air)

Shareholders of Korean Air Lines Co. agreed to change its corporate mandate to clear a hurdle for its takeover of Asiana Airlines, the airline said on Wednesday.

In a meeting at its headquarters in Seoul, nearly 70 percent of stockholders who were present voted to pass an amendment of an article, drastically lifting the cap on total outstanding stocks from 250 million to 700 million.

With the amendment, the company can push ahead with its plan to issue 173.6 million new shares to raise capital and realign stockholding status necessary to bring the long-time rival Asiana under its roof.

The company has 174.2 million shares outstanding as of Wednesday. The planned new issue, scheduled for March, will bring that number to 350 million.

The mega deal, which would create the largest airline in the world, was thought to have faced a setback Tuesday when the National Pension Service, the second-largest shareholder with an 8.11 percent stake, openly opposed to the article change and the acquisition itself, citing a possible damage to shareholder rights.

With hurdles cleared, Korean Air will proceed to raise 2.5 trillion won ($2.3 billion) via the rights issue in March and secure a controlling stake of over 60 percent in Asiana once it clears the authorities’ merger review, hopefully by mid-March.

In a statement, the company said it strives to maximize the synergy between the two airlines.

The airline also said a transition team consisting of experts from the fields of planning, finance, cargo and passenger transport is tasked to overlook the process. It is scheduled to seek a review by anti-trust authorities in other countries the airline operates in by mid-January, including the United States, the European Union and Japan.

During a briefing last month, President of Korean Air Woo Kee-hong vowed to keep most staff at both airlines on payroll after the takeover as he said Korean Air has “no plans to reduce supply.”

Some 28,000 staff members work at South Korea’s two national flag carriers, with 90 to 95 percent directly employed, according to the airline’s president.

In a recent interview with The Korea Herald, deputy minister for civil aviation Kim Sang-do said the acquisition is inevitable at a time when airlines around world are filing bankruptcy and announcing large-scale job cuts.

“With employment at the center of our government’s agenda, we are offering support through whatever measures possible to avoid layoffs (in the aviation industry),“ he said.

By Yim Hyun-su (hyunsu@heraldcorp.com)

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