Sensitive Sales
The Korea Development Bank (KDB) will initiate black sales of Korea Aerospace Industries (KAI) among non-financial affiliates that the KDB will sell off within three years. Even though the KAI was put up for sale in the M&A market three times since 2012, the KDB’s equity of more than 40 percent in the company translated into a large amount of money, preventing potential buyers from buying equity.
Accordingly, the KDB is now planning to sell off about 26 percent first, while giving up managerial rights premium. Thus, the KAI is expected to become the first among five companies to be sold by the Government-wide Corporate Restructuring Council, which plays the role of a control tower in corporate restructuring.
According to financial regulators and the financial industry on Nov. 2, it was confirmed that the KDB decided not to extend a joint sell-off period after the period ends at the end of this year. The joint sell-off period involves the KDB, Hanwha Techwin (10 percent stake), Hyundai Motor (10 percent stake) and DIP Holdings (5 percent stake).
“When the period runs out, the KDB will independently sell off its equities early next year,” said a high-ranking financial official at the government.
“As the company is a military hardware developer, we have to discuss the matter with the Ministry of Trade, Industry and Energy. KAI is the most attractive offering that the KDB can put up for sale among its non-financial affiliates in terms of corporate conditions,” he added. “We are considering selling off our affiliates after dividing them into military and non-military hardware companies.”
The joint sell-off accord in the shareholders council is an agreement among them signed to pursue a joint sell-off for a managerial premium in 2011. But no extension of the period can allow KAI shareholders to independently sell off their equities of their own accord. Thus, the KDB will sell off its stake of 26.75 percent ahead of others, while excluding Hanwha Techwin’s and Hyundai Motor’s equities.
“The joint sell-off accord for a managerial premium and a worsening market situation brought many difficulties to KAI shareholders,” said a representative in the banking industry. “Block sales of the KDB’s equities are a more practical plan.” It is also forecast that the Government-wide Corporate Restructuring Council for so-called zombie companies will be able to contribute to the sell-off of KAI equities. Military hardware companies have owned a 50 percent stake in KAI. This fact made the sell-off of the company not easy. Due to the characteristics of the defense industry, a buyer of KAI has to receive the approval of its appropriateness as the largest shareholder from the Ministry of Trade, Industry and Energy. But since the Government-wide Corporate Restructuring Council can do this job, it is predicted that the sell-off work will be easier.