Eastar Jet to be acquired by cash-rich property developer SJ

Property developer confirms acquisition, raises bidding amount to outrun SBW consortium

(Eastar Jet)

Sung Jung, a midsized real estate developer here, on Thursday confirmed its intention to acquire the financially struggling low-cost air carrier Eastar Jet by raising its initial bidding amount.

Losing out on the bid was the well-funded consortium led by underwear manufacturer Ssang Bang Wool and equipment maker Kanglim. The companies saw their stock value take a double dip this week amid the neck-and-neck takeover battle.

The real estate developer submitted its official statement to the Seoul Rehabilitation Court via the sale organizer on Thursday morning, notifying that it will push ahead with the acquisition, market observers said. It had until the end of Friday to send its letter to the court.

After conducting due diligence by July 2, the company is slated to sign an investment contract with Eastar Jet, in time to submit a comprehensive rehabilitation plan to the court by July 20.

Eastar Jet’s incumbent debt total is estimated to exceed 200 billion won ($177 million), of which overdue wages and retirement allowances account for over 70 billion won.

Earlier in the week, the bidding game appeared to work out to the advantage of the SBW consortium, which turned out to the sole bidder in the public tender.

Competitors such as Pan Ocean, a shipping company under the wing of poultry producer Harim Holdings, had dropped out as it did not submit a bid by the Monday afternoon deadline.

Boosted by market expectations, Ssang Bang Wool and Kanglim had seen their respective stock price peak at 1,445 won and 5,100 won on Monday afternoon.

The figures, however, nose-dived the next day after Sung Jung came into view as a hidden preferred bidder. Prices temporarily took an upturn on Thursday morning amid uncertainties, but plunged again as Sung Jung was said to have confirmed its acquisition.

In bankruptcy cases, the stalking horse bidding system refers to a deal with a potential buyer that is hidden from the public, creditors, and the courts. As front-runner in the game, Sung Jung held a priority right to the deal, and was allowed to renew its initial bidding amount, should the late coming bidder come up with a higher bid.

Though both sides refrained from unveiling the figures, Sung Jung’s bidding price was estimated to stand at around 80 billion won, falling short of the estimated 100 billion won suggested by the SBW consortium.

Sung Jung is a midsized real estate business based in South Chungcheong Province’s Buyeo, with an annual revenue of 5.9 billion won as of 2020. Backing its financial resources are cash-rich affiliates such as Baekje Country Club and Daekuk Construction, which respectively made 17.8 billion won and 14.6 billion won in annual revenue.

In January, Eastar filed for court receivership after months of hardships, as most of its flight routes were suspended amid the prolonged pandemic and its air operator certificate became ineffective in May last year.

Previously, another low-cost carrier operator, Jeju Air, had set out to acquire a 51 percent stake in Eastar for 69.5 billion won but later reduced the amount to 54.5 billion won and ended up scrapping the deal altogether in July 2020.

By Bae Hyun-jung (tellme@heraldcorp.com)

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