Livestock, underwear firms bid for Korea’s Eastar Jet

Ssang Bang Wool, a textile firm best known for its underwear, the livestock and animal feed specialist Harim Group, and private equity funds are among the prospective buyers of a majority stake in Eastar Jet (ESR, Seoul Gimpo), investment banking sources told the Maeil Business Newspaper on May 31. Currently under a court-led rehabilitation scheme, the financially challenged budget carrier, which suspended most of its flight operations in March 2020 and subsequently lost its AOC, has received letters of intent from several entities and plans to choose a final bidder later in June. Harim Group is pursuing its bid via a shipping subsidiary, PanOcean, and intends to create synergies in the logistics sector by combining shipping and aviation. It has reportedly enlisted Samjong KPMG as its acquisition advisor and is expected to bid aggressively alongside careful due diligence. Ssang Bang Wool submitted its letter of intent through its subsidiary Kanglim, a heavy-duty vehicle and crane manufacturer, the sources said, and “some private equity funds” are also participating in the process. However, it is Harim Group, which acquired 58% of PanOcean, South Korea’s largest bulk shipping company, in June 2015 for KRW1 trillion (USD900 million), that is generating the most buzz because of its size. The stalking horse method that Eastar Jet is using for the process, in which a preferred bidder is initially selected to set a low-end bidding price, is advantageous for buyers with strong powers of capital mobilisation. As previously reported, Eastar Jet signed a conditional investment contract on May 14 with an unnamed medium-sized firm to take on this role. So far, only regional and mid-sized companies have shown interest in the airline, and a large-scale company like Harim would be likely to win the auction, the sources explained. Harim Group has annual sales of KRW2 trillion (USD1.8 billion) and assets of KRW10 trillion (USD9 billion), according to the Maeil. It saw an annual operating profit of KRW100 billion (USD90 million) in 2020, and the net worth of PanOcean, which mainly ships iron ore, coal, and grain, stood at about KRW190 billion (USD171 million) as of the end of last year.