Korea Aerospace Declines as Stake Sale Plan Abandoned

Korea Aerospace Industries Ltd. (047810) declined 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 3.2 percent to close at 25,850 won, the lowest since Dec. 13. Korean Air Lines Co., which didn’t submit a final bid for the planemaker, rose 2.3 percent to 46,000 won, the highest since Nov. 20. Hyundai Heavy Industries Co. (003490), the world’s biggest shipbuilder, climbed 1.1 percent to 234,000 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 (005380) 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.

Doosan Corp. (000150), the holding company of Doosan Group that owns shares in Korea Aerospace, dropped 5.4 percent to 123,000 won. Hyundai Motor, South Korea’s biggest automaker, fell 0.4 percent, while Samsung Techwin advanced 1.3 percent.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.