Kumho picks up Korea Express

Deal to buy logistics firm makes group a global player

January 18, 2008

Kumho-Asiana Group, the nation’s seventh-largest conglomerate with assets of 22.8 trillion won ($24.3 billion), is ready to leap into position as a top global logistics company. It was the winning bidder yesterday to buy a controlling stake in Korea Express, Korea’s largest logistics company, according to officials from the Seoul Central District Court. The bid was estimated at between 4 trillion and 5 trillion won, according to court officials. Kumho Asiana is already involved in logistics through its operation of Korea’s second-largest airline, Asiana Airlines.Asiana Airlines and Daewoo Engineering and Construction, two Kumho-Asiana affiliates, will reportedly acquire 24 million new shares of Korea Express, equivalent to 60 percent of its expanded share capital, through a joint bid. Considering that the share price of Korea Express was 89,800 won as of yesterday, the value of 24 million shares is estimated at around 2.2 trillion won. Kumho-Asiana plans to sign a memorandum of understanding to purchase the stake in Korea Express on Jan. 25. Korea Express has been under court receivership since 2001, when it failed to pay debt inherited from its former mother company, Dong Ah Construction Industrial Company. According to the Seoul Central District Court, the Hanjin Group, STX Group and Hyundai Heavy Industries Company also made bids for Korea Express. The Kumho-Asiana Group took over Daewoo Engineering and Construction in June 2007.“The main goal of mergers and acquisitions is maximizing synergy, not making the company bigger,” an official from Kumho-Asiana said. According to the official, Kumho-Asiana has been preparing for the takeover of Korea Express for three years. Kumho-Asiana’s New Business Department teamed up with a consulting firm in order to review the tangible benefits of the merger. A task force team also helped on occasion. “That’s the way you make a letter of intent, which exceeds more than 200 pages when published. The letter includes everything concerning the takeover deal, such as potential risk and growth,” the Kumho-Asiana official said. With the purchase of a controlling stake in Korea Express, which has 1.7 trillion won in assets, changes are expected in the rankings of Korea’s top conglomerates in terms of the value of their assets. When the deal is complete, Kumho-Asiana could move up to the No. 6 ranking, overtaking the GS Group. It will also widen the gap with its rival, the Hanjin Group, which is involved in logistics through Korean Air, Korea’s largest airline. By Sung So-young Staff Reporter [so@joongang.co.kr]