Korea Aerospace Declines as Stake Sale Plan Abandoned

Korea Aerospace Industries Ltd. (047810) dropped the most in almost seven months in Seoul trading after shareholders abandoned the sale of a $1 billion controlling stake in the company when they failed to get enough bids.

Shares in South Korea’s only planemaker fell as much as 5.1 percent, the biggest drop on a closing basis since May 31, to 25,350 won and traded at 25,850 won as of 10:26 am. Korean Air Lines Co., which didn’t submit a final bid for the planemaker, rose as much as 3.9 percent, the most since June 5, to 46,700 won. Hyundai Heavy Industries Co. (003490), the world’s biggest shipbuilder, climbed as much as 1.7 percent to 235,500 won.

The shareholders intend to hold talks on what to do next, state-owned Korea Finance Corp. said without elaboration. The group may be unable to revive the sale of the 42 percent stake in the near future because Dec. 19 presidential elections will lead to a new government and possible change in policy, said Kwak Min Jeong, an analyst at BS Securities Co. in Seoul.

“It’s unclear what the new administration’s stance will be,” she said. “It may take a while for the shareholders to resume the sale.”

Hyundai Heavy was the only bidder ahead of yesterday’s deadline, Korea Finance, which led the shareholders group, said in a statement. At least two bids are needed for a deal to go ahead because of rules covering sales by government entities.

Korean Air

Park Geun Hye, the presidential candidate for the ruling party, said Dec. 16 during a debate that the sale of Korea Aerospace must be carried out prudently. The main opposition candidate Moon Jae In is against the sale.

Korea Finance offered part of its 26 percent stake in Sacheon-based Korea Aerospace. It plans to remain the second- biggest shareholder. Hyundai Motor Co., Samsung Techwin Co. and Doosan Group are each selling their 10 percent holdings.

Korean Air decided against submitting a bid because Korea Aerospace shares are overvalued, it said in an e-mailed statement. The carrier had registered a preliminary interest as it seeks to expand its aerospace business. The company makes parts for Airbus SAS and Boeing Co. (BA) planes. Hyundai Heavy sought the stake as it tries to pare its reliance on the slumping global market for ships.

The aerospace company has a limited pool of potential bidders because national-security rules mandate that it remains under local ownership. The South Korean military accounted for 57 percent of its 1.29 trillion won ($1.2 billion) sales last year.

The company builds the T-50 jet-plane trainer, which was developed with Lockheed Martin Corp. (LMT), and a helicopter devised with Eurocopter. It has a market value of $2.3 billion at the current share price, according to data compiled by Bloomberg.

To contact the reporter on this story: Seonjin Cha in Seoul at scha2@bloomberg.net; Kyunghee Park in Singapore at kpark3@bloomberg.net;

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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