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Shinsegae retracts proposal to buy control of S. Korea's No. 2 carrier

Shinsegae Group, South Korea's largest retail company, said Friday it has retracted its proposal to buy a controlling stake in a formerly debt-ridden local builder that could also have given it ownership of the country's No. 2 air carrier and other affiliates.

"As we have confirmed that none of our rival firms came forward to offer to buy the Kumho Industrial Co. shares, we hereby announce that Shinsegae will not be taking part in the bid going forward," the company said in an e-mailed statement.

Shinsegae further said that its initial submission of the letter of intent was solely defensive for one of its department stores.

The builder is a major shareholder of Asiana Airlines with a 30.08-percent stake, and also has control over three other affiliates, including a 100-percent share in Kumho Terminal.

Shinsegae operates a department store in the southwestern city of Gwangju on a plot leased from Kumho Terminal and apparently was worried that Lotte, its industry rival, might become the owner of the plot by buying the builder.

The retail giant had submitted the letter of intent on the last day of the open bid on Wednesday to purchase the controlling stake in Kumho Industrial, which recently graduated from a five-year debt rescue program and was put on sale by its creditor banks.

Share prices of Kumho Industrial, which had shot up by the daily limit on Thursday, started off strong on the main local bourse on Friday, but plunged later in the afternoon session upon news of Shinsegae's withdrawal to end at 26,250 won ($23.85), down 13.37 percent from the previous trading session.

Aside from four private equity firms and a local midsize builder, Shinsegae was reportedly the only conglomerate that had opted to make a bid.

President Park Sam-koo of Kumho Asiana Group, who had been the de facto owner of Kumho Industrial prior to the debt workout, currently has the right of first refusal in the bid, and thus can choose to buy about 50 percent of the outstanding stake or not enter the bid at all, depending on how much is needed to outbid his rivals.

The chances of the 70-year-old Park winning the bid seemed to have slimmed down on Wednesday as market watchers said the heated competition could push up sale prices to as much as 1 trillion won, but the withdrawal by the retail conglomerate may have eased some of the pressure on the group's president.

The lead managers for the deal -- KDB and Credit Suisse -- will draw up a shortlist of contenders after an evaluation next month, although the details of the schedule have not been disclosed. (Yonhap)