이 기사는 2021년 06월 03일 07:44 thebell 에 표출된 기사입니다.

South Korea’s leading livestock company Harim Group has entered the race to acquire financially troubled budget airline Easter Jet to beef up its logistics business by branching out into the air cargo industry.

Pan Ocean under Harim Group has submitted a letter of intent to buy Eastar Jet on May 31. The budget carrier will be sold through a stalking-horse bid process as the company is under court management.

Harim’s participation in the deal is being conducted by Harim Group Chairman Kim Hong-guk, who aims to establish the logistics system which covers land, sea, and air.

Kim has paid attention that the proportion of aviation logistics is gradually expanding, unlike in the past when the maritime logistics was more dominant.

The biggest hurdle is money. Harim’s possible acquisition of Eastar Jet depends on how much money it can secure as the group has to compete with a stalking-horse bidder over the acquisition price.

The acquisition price of the air carrier hasn’t been decided yet. But, it is likely to be at least tens of billions of won considering that a 40% stake in Eastar Jet owned by its largest shareholder Eastar Holdings was valued at around 55 billion won ($49 million) when Jeju Air tried to acquire its smaller rival. A potential buyer is highly likely to have to pay hundreds of billions of won including additional financial burden.

Harim Group is currently financially strapped as it is suffering from sluggishness in its mainstay poultry business and its real estate development project in Yangjae-dong, Seoul.

Harim Co swung to a net profit last year after two consecutive years of net losses, but it still has a large amount of debt. Its parent Harim Holdings is also burdened with debt and interest expenses that have soared to record highs.

However, Pan Ocean, which joined the race, has ample financial flexibility, according to industry sources. While other cash-cow affiliates of the group, like NS Shopping, have financially supported subsidiaries and new businesses, Pan Ocean has invested in its own businesses only. The company has tried to stabilize its earnings by increasing the number of ships and diversifying its portfolio.

Pan Ocean has generated an annual operating income of about 200 billion won and revenue of around 2.5 trillion won in recent years. Its cash and cash equivalents were 220 billion won as of the end of March.

Industry sources said that it is natural that Harim Group wants to acquire Eastar Jet through Pan Ocean considering both synergy and funding. The group aims to strengthen its value chain by verticalizing maritime and aviation logistics. This means that the company can import grains through Pan Ocean and poultry and pork breeds via air.

Harim Group may partner with a financial investor given that it formed a consortium with financial investor JKL Partners when it took over Pan Ocean.

“The possibility of acquiring Eastar Jet cannot be said definitively because the court's decision is important,” an official at Harim Group said, adding, “It is being led mainly by Pan Ocean, and it is believed that its financial capability is enough to finance the acquisition.” (Reporting by Eun-jin Choi)