The second-largest shareholder, Daemyung Sonogroup, which had been at odds with Tire Bank over control of Air Premia, ultimately stepped back after half a year. They decided to sell all of their equity to Tire Bank, securing only about 19 billion won in profit.
In the meantime, there were speculations in the market that Tire Bank and Daemyung Sono would engage in a fierce game of timing over the sale price. This was because Tire Bank's preemptive purchase option was set to be triggered on the 20th of this month. However, both sides chose to negotiate at a 'reasonable price,' and ultimately, Air Premia became the treasured property of its largest shareholder, Tire Bank.
The decision made by Daemyung Sono has led to various interpretations within the industry. First, it is understood that there was little reason to invest significantly in acquiring Air Premia given the overall decline in performance and financial conditions of low-cost carriers (LCCs). If Daemyung Sono had chosen to buy the 46% equity in Tire Bank at 1,900 won per share, they would have had to invest approximately 250 billion won more. It is also interpreted that since T’way Air, which has already successfully acquired control, is set to expand into the U.S. routes, the necessity to acquire Air Premia diminished.
◇Tire Bank waiting for a 'third party' to buy equity at a high price... ultimately negotiated at 1,900 won
According to investment banking (IB) industry sources on the 2nd, Sonointernational, the holding company of Daemyung Sono Group, has signed a contract to sell all of its equity in Air Premia held through the 'JC Aviation No. 1 Limited Liability Company (JC SPC)' jointly with the private equity fund (PEF) management company, JC Partners, to Tire Bank's AP Holdings. The payment closing is scheduled for the end of September.
The agreed-upon price for the equity sale between the two sides is 1,900 won per share. This is an increase of 300 won compared to the price of 1,600 won when Daemyung Sono purchased the equity from JC Partners. In other words, from Daemyung Sono's perspective, they are selling the 22% equity in Air Premia, which they bought from JC Partners at 1,600 won per share, to AP Holdings at 1,900 won. Considering that the total number of shares for sale is 62,856,278, the profit that Daemyung Sono expects to make from this deal is calculated to be 1.88 billion won.
Sonointernational's foray into acquiring control of Air Premia dates back to last October when it expressed its intention to buy the 22% equity held by JC Partners. At that time, Daemyung Sono dismissed claims of having a 'plan to acquire control,' but it is widely believed in the industry that they actually entered the competition with that aim.
It was expected that Daemyung Sono and AP Holdings would engage in a fierce time game over the control of Air Premia starting the 20th of this month. This was because AP Holdings could exercise its preemptive purchase option against Sonointernational and JC Partners for a month starting that day. If Sonointernational and JC Partners did not accept AP Holdings' purchase of their preferred shares, they could also publicly sell their equity to a third party.
Kim Jeong-kyu, chairman of Tire Bank and concurrently serving as the CEO of AP Holdings, is reported to have insisted on the principle that "I will either sell my equity (to Daemyung Sono or a third party) for as high a price as possible, or I will aim to acquire Daemyung Sono's equity for as low a price as possible." It is also known that Chairman Kim had hoped to see a large corporation with financial power emerge to buy the equity at a high price.
However, in light of the overall decline in investment sentiment for the LCC market, it was realistically difficult for a strategic investor (SI) to appear and buy the equity in Air Premia at a high price. As a result, it seems that Chairman Kim concluded that it was best for him to buy the equity as the second-largest shareholder at 1,900 won. The price ceiling set by Kim's side was reportedly 'under 2,000 won.'
◇Investing an additional 250 billion won to acquire Air Premia?... Daemyung Sono chosen practicality
After half a year of attempting to acquire Air Premia, Daemyung Sono ended up retreating with only a profit of 1.88 billion won. An IB industry insider noted, "While the return on investment compared to the investment period is not bad, it seems they initially did not intend to exit with just this much profit after entering with such ambition, so it is likely they feel regret internally."
In fact, it is reported that Daemyung Sono has been contemplating whether to acquire Air Premia until recently. Given that there have been evaluations indicating that T’way Air was bought at a high price, it would have been difficult to acquire Air Premia with a high premium. Sonointernational had recently invested 250 billion won to acquire Tway Holdings. Control premiums are estimated to reach 30-40%.
If Daemyung Sono had bought AP Holdings' equity at 1,900 won per share, the total would have reached 250 billion won. Considering they already purchased the 22% equity in JC Partners for over 100 billion won, this would mean acquiring approximately 70% of the equity for more than 350 billion won. A simple reverse calculation puts the entire corporate value at 500 billion won. Considering that the market capitalization of Jeju Air, the number one LCC in the country, is only 540 billion won, this is excessively high.
Another reason for Daemyung Sono's abandonment of control over Air Premia is that T’way Air, which it previously had an interest in, is poised to enter the U.S. routes. The initial reason Daemyung Sono was interested in Air Premia was that it was the only domestic LCC with routes to the U.S. However, T’way Air is set to launch a new route to Vancouver, Canada, starting in July, thereby fully commencing its entry into U.S. routes.