Korean Air's Asiana deal hits turbulence as stakeholder objects

Korean Air Lines faces heavy resistance to a planned acquisition of domestic rival Asiana Airlines, including from a major shareholder of KAL's parent company that fears a dilution of its stake. Korea Corporate Governance Investment, an activist fund and major Hanjin KAL shareholder, expressed "strong opposition" to such a takeover immediately after local media reported the proposal. In an unusual step, the fund indicated its stance even before a formal announcement of the plan was made. The acquisition plan calls for Hanjin KAL to receive 800b won ($721m) in fresh capital from state-backed lender Korean Development Bank. KAL will use this cash to buy new shares in Asiana, turning the smaller rival into a subsidiary. The activist fund, known as KCGI, asserts that the government-supported arrangement gives an edge to KAL management, as the two sides have been in conflict. The deal likely would dilute KCGI's stake in Hanjin KAL, of which 41.3% is owned by Chairman and CE Cho Won-tae and some of his family. On Friday, KCGI demanded that Hanjin KAL hold an extraordinary shareholders meeting. Hanjin KAL's board has no plans to accommodate the request and intends to complete the development bank's investment before the company's general meeting next spring. KCGI has indicated it is willing to take legal action to counter the aviation group's efforts. The labor unions of KAL and Asiana also are taking a stand against the acquisition, which is designed to help the struggling airlines ride out the coronavirus pandemic. The bank's plan calls for integrating KAL and Asiana in several years, while a proposal to combine their three low-cost carriers also has been floated. With elimination of overlapping service appearing certain, the unions are worried about job cuts.<br/>