Hanjin Transportation, the Korean transportation and logistics company, which planned to raise up to $210 million by divesting its stake in Korean Air Lines, pulled the deal on Thursday amid market turmoil.
The timing for the clean-up trade was clearly not ideal. China’s stock markets continue to collapse, with roughly 1,500 companies filing for trading suspension on the Shanghai and Shenzhen exchanges. as Greece edged closer to an exit from the Eurozone.
Korean Air’s own negative market performance — it fell 3.7% on July 8 and is down 6.8% year-to-date — did not bode well for the block trade.
Korea meanwhile continues to be plagued by a recent outbreak of the deadly Middle East Respiratory Syndrome (MERS) virus, which has killed 33 people so far. The country’s bellwether index has slid 5.8% since the first diagnosis on May 20, although is up 5.3% year-to-date.
Korean Air is one of the stocks affected by the MERS outbreak, with the country’s largest airline cutting back on the number of flights to Japan and China, according to media reports.
The deal launched under the joint leads of Citi and Samsung early evening Wednesday in Hong Kong, with some 5.79 million shares on offer at an indicative price range between W40,000 to W41,500 per unit, according to a term sheet seen by FinanceAsia. The price range represented a 1.2% to 4.8% discount to the July 8 close. The shares on offer represent 7.95% of the total outstanding capital.
Research on Korean Air is generally positive. The airline has enjoyed decreased costs due to lower jet fuel prices — a one dollar drop in average jet fuel price boosts Korean Air’s annual profits by W15 billion ($13.2 million), according to research by NH Investment & Securities. Korean Air owns 149 aircraft — 122 passenger and 27 cargo at the end of the first quarter — and earlier this year, enjoyed strong passenger demand thanks to new routes in China and Japan, as well as solid air freight demand on US routes.
However, in the wake of the MERS outbreak, the airline cancelled a number of flights to China and Japan due to a sharp drop in passengers. According to local media reporters, Korean Air saw about 115,000 customers cancel flights during a three-week period from June 1 to 21.
Elsewhere in Korea
It has been a busy week in Korea. Innocean Worldwide, the in-house advertising agency of Hyundai Motor Group, priced its initial public offering near the middle of its targeted range.
Mirae Asset Life Insurance, Korea’s fifth-largest insurer, raised $306.5 million in an IPO about two weeks ago after pricing shares at the bottom of the range.
In May, two Samsung Life shareholders took advantage of a sharp share price rally to divest a $601 million stake in Korea’s largest insurance company by assets.
In March, the Korea Deposit Insurance Corporation completed a long-anticipated 2% stock divestment from Hanwha Life, raising W133.4 billion.
This article has been updated to reflect Hanjin Transportation's decision early Thursday morning to drop its planned divestment.