Korean Air Lines to split and add a holding company

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Korean Air Lines to split and add a holding company

Korean Air Lines, a flagship affiliate of Hanjin Group, said yesterday that it will split the company by establishing a new holding company.

The nation’s largest air carrier held a board meeting and approved a spin-off of the company into Hanjin KAL Holdings and Korean Air Lines, which will carry on the airline business.

“The reason we’re establishing a holding company is to increase the value of the company and the stock holders,” KAL said in a release. “It also enhances management transparency by solving the circular shareholding structure within the group.”

Based on KAL’s net assets, it will be divided by a ratio of 0.1945968 to 0.8054032, with Hanjin KAL Holdings taking the former portion.

Hanjin KAL Holdings will take care of the company’s investments and manage Hanjin Group affiliates as well as handle intellectual property rights.

The transfer of assets to Hanjin KAL Holdings will include 100 billion won ($89 million) in cash, 512.1 billion won worth of Hanjin Group affiliate shares, 91.1 billion won in real estate and 52.7 billion won in available-for-sale securities. Also, 270 billion won worth of debt will follow.

KAL said it will hold a temporary shareholders’ meeting in late June to get approval for the restructuring plan and complete the process by Aug. 1. Suk Tae-soo, the current CEO of Hanjin Corporation, will act as the new CEO of Hanjin KAL Holdings.

Hanjin Group’s current circular shareholding structure is Jeongseok Enterprise-Hanjin Corp.-KAL-Jeongseok Enterprise.

The group official said that it will take about two years for Hanjin KAL Holdings to acquire 20 percent of KAL shares to act as a true holding company.

Industry insiders speculate that if the restructuring goes well, it will further push KAL to acquire Korea Aerospace Industries. Last year, KAL withdrew from bidding for KAI, citing the high price, but sources said the nation’s largest airline is still interested.

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