This article was published on Feb. 19, 2025, at 6:17 a.m. on the ChosunBiz MoneyMove site.
Daemyung Sono Group has entered into dramatic negotiations with its largest shareholder, YeaRimDang, about a month and a half before the regular shareholders' meeting of T’way Air. Instead of competing over votes at the shareholders' meeting, they have decided to acquire management rights to T’way Air. Daemyung Sono has also withdrawn its request for a temporary injunction related to the items to be discussed at the regular shareholders' meeting, which had initiated the management dispute.
At the end of last year, Daemyung Sono had negotiations with YeaRimDang regarding the acquisition of T’way Air, but they could not find common ground due to the conflicting positions of Daemyung Sono wanting to acquire the operational company and YeaRimDang wanting to sell its intermediate holding company, Tway Holdings. Although the final sale prices proposed by both sides at that time differed by only 10 billion won, discussions on the deal structure fell through, leading to deepening grievances.
Once Daemyung Sono completes the acquisition of T’way Air, it is expected to initiate the acquisition of management rights in Air Premia. The goal of Daemyung Sono Group Chairman Seo Jun-hyuk is to create a 'mega low-cost carrier (LCC)' by acquiring management rights of both companies. However, some speculate that if Daemyung Sono injects large amounts of money into T’way Air first, it may lower the amount it can offer to Air Premia.
According to the investment banking (IB) industry on the 19th, the conflict between YeaRimDang and Daemyung Sono over the management rights of T’way Air has come to an end (☞[Exclusive] End of T’way Air management dispute… YeaRimDang sells stake to Daemyung Sono). An industry insider familiar with the company's internal circumstances noted, "YeaRimDang expressed its intention to sell management rights, and Daemyung Sono agreed to withdraw all temporary injunctions in response."
In a public disclosure on the 17th, T’way Air stated, "Our largest shareholder YeaRimDang is currently in negotiations regarding the sale of management rights for Daemyung Sono and Tway Holdings, but nothing has been concretely decided so far," acknowledging that the conflict is undergoing resolution.
It is known that Daemyung Sono received binding provisions ensuring YeaRimDang cannot easily withdraw from the sale and withdrew its request for temporary injunctions. An IB industry insider commented, "Both sides had attempted negotiations last year but failed," adding, "If YeaRimDang had only expressed a vague intention to 'consider selling,' would Daemyung Sono have withdrawn the injunction request a day before the hearing?"
Daemyung Sono holds approximately 26.77% equity in T’way Air. The gap in equity ownership with major shareholders YeaRimDang and Tway Holdings (30.06%) is only 3 percentage points (p). Additionally, the National Pension Service and foreign investors hold 1.39% and 2.19%, respectively. Last month, Daemyung Sono sent a certificate of contents to T’way Air demanding the resignation of existing executives, including Vice Chairman Na Seong-hun, and requested proposals to elect nine directors while filing for a temporary injunction at the Daegu District Court.
According to industry insiders, the likelihood of a settlement between the two sides is high. However, the details of which company's equity will be bought by Daemyung Sono and at what price have not been disclosed. The largest shareholders of T’way Air are YeaRimDang and Tway Holdings, holding 30.06% equity, while the largest shareholders of Tway Holdings comprise YeaRimDang, Chairman Na Chun-ho, and Vice Chairman Na Seong-hun, who collectively hold 46.91%.
The two sides attempted negotiations over T’way Air management rights until the end of last year but ultimately failed. YeaRimDang insisted on selling its stake in Tway Holdings instead of T’way Air, but Daemyung Sono maintained that it could not accept such a condition.
YeaRimDang has no choice but to demand the sale of Tway Holdings. If the operational company T’way Air is sold, most of the sale proceeds will flow into Tway Holdings, which holds about 29% equity in T’way Air. Since YeaRimDang holds less than 2% of T’way Air equity, the profit YeaRimDang can gain is limited. Once T’way Air equity is sold to Daemyung Sono, the corporate value of Tway Holdings, now left with only a shell, is bound to plummet. This poses a significant challenge for YeaRimDang and the family of Chairman Na, who hold substantial stakes in Tway Holdings.
An IB industry expert remarked, "Although Tway Holdings will temporarily have a lot of cash accumulated, once T’way Air departs, it will just be cash without future growth potential," adding, "In this case, Tway Holdings’ stock price is bound to fall significantly." The expert continued, "There are companies with 300 billion won in cash but a market capitalization of only 200 billion won."
On the other hand, Daemyung Sono has preferred to purchase equity in T’way Air. If management rights of Tway Holdings, the holding company, are acquired while equity remains with YeaRimDang and Tway Holdings, the ownership structure will inevitably become quite complex. Daemyung Sono and YeaRimDang could not overcome this difference in stance, and ultimately, despite the final sale prices proposed by both sides differing by just 10 billion won, they could not reach an agreement. An industry insider stated, "A 10 billion won difference is not enough to cause a deal to fall through," indicating that the essence of the conflict between the two companies was not merely about money.
After news of the negotiations broke, the stock prices of T’way Air and Tway Holdings fell over 20% on the 18th. Nevertheless, industry observers believe that Daemyung Sono will recognize a higher sale price than the share price before the plunge. There are discussions about attaching a 'reasonable level' of management rights premium to the acquisition.
After acquiring T’way Air, Daemyung Sono plans to initiate the acquisition of management rights in Air Premia. The decision on whether Air Premia's major shareholder, AP Holdings (the company of children of Kim Jeong-kyu, the chairman of Tire Bank) will exercise its preemptive purchase right in May and what the price would be will determine whether Daemyung Sono moves forward with the acquisition of Air Premia. Daemyung Sono plans to acquire the 40% equity held by AP Holdings, and based on the existing price (1,600 won per share), the acquisition cost is expected to reach about 190 billion won. However, if AP Holdings also sells management rights, it would demand a premium, so the actual transaction price remains uncertain.
An industry insider noted, "From Air Premia's perspective, seeing Daemyung Sono invest heavily to acquire T’way Air, they might be thinking of asking for a 'higher price.' Conversely, from Daemyung Sono's standpoint, since a substantial amount has already been spent on acquiring T’way Air, there is a possibility that the upper limit on funds allocated for acquiring Air Premia might decrease somewhat."