Seoul (The Korea Herald/ANN) - The bidding war over Korea's sole aircraft maker Korea Aerospace Industries (KAI) is gaining fresh momentum, with Hyundai Heavy Industries unexpectedly joining the race on Thursday.
Industry watchers had widely expected that Korean Air would become the sole bidder to acquire a 41.75-per cent stake in KAI after the first bid last month failed to draw bidders other than the nation's largest flag carrier.
Now two competitors meet the legal conditions for a valid competition to continue the bidding process. If any qualified bidder is decided to participate in the final bidding next week, the KAI acquisition worth 1.4 trillion won (US$1.3 billion) is scheduled to be completed within the year.
"We have long been watching the growing aerospace industry as our next growth engine and the KAI acquisition was a good opportunity to diversify our business portfolio," said a Hyundai Heavy Industries spokesperson.
"Japanese companies like Mitsubishi Heavy Industries that used to focus on shipbuilding are now expanding the proportion of the value-added aerospace business. The bidding participation is not a big surprise within the company."
The world's largest shipbuilder produces destroyers and submarines even though the defence sector makes up a tiny portion of the company's 25 trillion won sales. Especially, its machinery prowess is expected to create synergy with the future aerospace business.
While Korean Air is allegedly struggling to secure capital for the potential acquisition and to relieve opposition from the labour union of KAI, analysts say Hyundai Heavy Industries seems to have an edge in terms of funding the $1 billion project.
"Investors had expectations about a company that has a stronger willingness to nurture the nation's aerospace industry and enough money to invest for the KAI bidding. Hyundai Heavy's participation seems to affect positively to the stock price of KAI," said an analyst at Hanwha Securities.
A shareholders' committee of KAI, consisting of state-run financial firm Korea Finance Corporation, Samsung Techwin, Hyundai Motor and Doosan Group, recently announced it will sell off their combined stakes in the company within the year.
After two failed attempts in 2010 and 2011, Korean Air newly joined the bidding in August but is facing financial pressure together with the fierce opposition from the labour union of KAI.
In a recent meeting with company executives, Hanjin Group chairman Cho Yang-ho who is also chief of Korean Air, allegedly hinted he could give up the bid if the acquisition price would not be lowered further.