Korea Aerospace Industries (KAI) and prospective foreign investment partners BAE Systems and Boeing have again failed to reach agreement on key issues.

Sources close to talks between the parties say major sticking points include the valuation of KAI and the number of board seats assigned to foreign partners. Talks were due to be completed by the end of last month, but have been extended with no new deadline after the failure of a recent visit to Boeing's Seattle base by KAI president Lim In-Taik. The deadline has been repeatedly extended since an initial disagreement in June.

KAI says BAE and Boeing will retain exclusive negotiating rights for the purchase of a stake of about 30-35%, from which it hopes to raise 200 billion won ($180 million) to help repay its 550 billion won debts. Sources say BAE and Boeing find KAI's valuation unrealistic, with the sides "not talking in the same ball park". KAI is also apparently resistant to BAE/Boeing representation on its board proportional to their stake. If the foreign companies decline to budge KAI will either have to surrender a larger stake or settle for less money.

Nevertheless, the sources say that though BAE/Boeing have found the negotiations "frustrating", the talks are more positive now than they have been. The two companies were chosen by KAI in April after a bid from a Lockheed Martin/Aerospatiale Matra-led group missed a submission deadline. KAI was formed from most of the aerospace capacity of Daewoo Heavy Industries, Hyundai Space and Aircraft and Samsung Aerospace.

Source: Flight International