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Speculation about Jin Air offering excites M&A market and stock investors

2018.06.12 14:14:59 | 2018.06.12 16:19:32
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The name of Jin Air, a budget carrier under Korean Air Lines, is stirring excitement in the Korean M&A market on speculation that its owner Hanjin Group may be forced to put it for sale in return for saving its business license and preventing disruption in the operation of the lucrative airliner for violating aviation rules.

The government and independent legal experts are reviewing whether to take away Jin Air’s license after the carrier was found to have seated American citizen Cho Hyun-min, the controversial youngest daughter of the group chairman, on its board.

According to sources on Monday, early birds with eyes in aviation business where new entries are more or less impossible have already moved to study value of the company despite little movement from Hanjin.

IS Dongseo, a local builder, and other mid-sized enterprises as well as LCC license seekers all could be interested. If the company loses license, over 1,900 jobs at Jin Air are at risk.

Shares of Jin Air - one of two publicly trading players among LCC category - were up 5.32 percent to close at 31,700 won on Tuesday. Shares of holding company Hanjin KAL were also up 2.78 percent to close at 22,200 won.

The Ministry of Land, Infrastructure and Transport is expected to determine the fate of Jin Air within this month. The Korean aviation law excludes foreign nationals from sitting on the board of a national flag carrier. Cho had been on the board of Jin Air for six years from 2010, an illegal act that can cost its license in airline business.

Given public sentiment towards the Cho family, the government may take the most extreme administrative action on Jin Air. Hanjin Group family members and companies are under a barrage of probes from authorities ranging from prosecution and fair trade commission to the transportation ministry after the youngest daughter’s tantrum generated a gush of reports of outrageous excesses by the Cho family from employees.

The Cho family may opt to give up the budget carrier whose revenue stops at one tenth of the bigger full-service carrier Korean Air to save the license.

The stock price of Jin Air faltered after April due to its uncertain future. The price tag on the airliner may hover at around 600 billion won ($55.9 million) for the 60 percent stake held by Hanjin KAL, given the current market value of 903 billion won.

By Yoon Jin-ho and Minu Kim

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]

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