National Pension Service Decides Against Acquisition of Asiana by Korean Air… “It undermines shareholder value”

Input 2021.01.05 16:24

Opposition to paid-in capital increase at extraordinary shareholders’ meeting on the 6th
Whether to take over depends on the choice of minority shareholders and employee stock ownership

It was decided on the 5th to oppose Korean Air’s proposal to change the articles of incorporation for the takeover of Asiana Airlines at the Korean Air’s extraordinary general shareholders’ meeting held on the 6th.

Korean Air is planning a paid-in capital increase worth 2.5 trillion won for the acquisition of Asiana Airlines. To implement a paid-in increase, Korean Air needs to change the articles of incorporation to increase the total number of issued shares.

The National Pension Trustee Responsibility Committee (Consignment Committee) held its first meeting this morning this morning to deliberate on the amendment of the articles of incorporation of the provisional shareholders’ general of Korean Air to exercise the right to vote against it. The National Pension Plan is the second largest shareholder of Korean Air with 8.11%.

The consignment committee opposes Korean Air’s acquisition of Asiana Airlines because it could damage shareholder value. The trustee said, “In the process of signing an Asiana Airlines takeover contract, the decision to take over without due diligence against Asiana Airlines, and the fact that the reason attributable to Asiana Airlines is not defined as the reason for canceling the contract, and the contents of the contract may be disadvantageous to Korean Air. There was a negative opinion that there was a concern,” he said. “As a result of voting after several discussions, the dissenting opinion prevailed, so I decided to finally oppose it.”

The commission members discussed the agenda for nearly two hours. Regarding this agenda, it is reported that out of nine commissioners, five oppose, three agree, and one abstains. In general, the trustee decides the direction of voting by agreement. However, in the case of this agenda, the committee members showed tight positions for a long time and voted.

Korean Air will hold an extraordinary shareholders’ meeting on the 6th and vote on some amendments to the articles of association for the total number of shares for a paid-in capital increase to be promoted to take over Asiana Airlines. Amendments to the articles of incorporation, which are special resolutions, must be approved by at least two-thirds of the voting rights of shareholders present at the general shareholders’ meeting and at least one-third of the total number of issued shares.

Until now, the amendments to the articles of incorporation were expected to be difficult to handle alone as Hanjin Kal, the largest shareholder of Korean Air, owns 31.13% (as of the 3rd quarter of 2020). As the National Pension Service decided to exercise a negative vote, the decision of minority shareholders (58.69%) and employee stock ownership associations (6.39%) made it possible to take over Asiana Airlines.