Air Incheon’s acquisition of Asiana Airlines’ cargo transport business

Korean Air is currently in the process of the sale of Asiana Airlines' cargo operations business as part of a new share subscription transaction involving KRW 1.5 trillion worth of newly issued shares by Asiana Airlines. The sale of the cargo operations business is a condition for obtaining merger control approvals from the European Commission and the Japan Fair Trade Commission. Air Incheon participated in the bidding for the sale of Asiana Airlines' cargo business (the "Target Business") and was selected as the preferred negotiator on June 17, 2024. On August 7, 2024, a Master Agreement was signed between Korean Air and Asiana Airlines regarding the sale of the Target Business (the "Transaction"). Following the European Commission's approval and in accordance with the Master Agreement, Air Incheon is expected to sign a merger through division agreement with Asiana Airlines after the completion of the new share subscription transaction between Korean Air and Asiana Airlines. Air Incheon will then acquire the Target Business through a merger through division with a transfer of funds scheduled for mid-2025, with the transaction value amounting to KRW 470 billion.

The merger through division and acquisition of the airline business is a unique transaction with no prior precedents. After the transaction, Air Incheon is to independently operate the Target Business, which involves complex issues such as obtaining domestic and international aviation licenses, identifying the assets for sale, and entering into a Transition Services Agreement. Despite such complex issues, Lee & Ko successfully advised Air Incheon based on its expertise in M&A transactions as well as its deep understanding of the aviation business until the signing of the Master Agreement. In addition, the transaction, reflecting the distinctions of the transaction and the will of the parties, was unique in that it was structured as a grant-in-aid merger, which is not common in practice in the M&A market. Furthermore, the transaction required the approval of the European Commission in addition to the usual merger clearance procedures of domestic and foreign competition authorities, which was successfully advised by both the M&A and Antitrust teams of Lee & Ko.

Lee & Ko provided legal advice on domestic and international aviation regulatory reviews, legal due diligence on the Target Business, negotiation of the Master Agreement, and related legal issues up to the signing of the Master Agreement. Lee & Ko will continue to advise on matters related to obtaining necessary domestic and international regulatory approvals, as well as on the execution of the merger through division agreement until the completion of the Transaction.