The sale of 41.8% of Korea Aerospace Industries (047810.SE) for KRW1.05 trillion ($926 million) collapsed Friday as shareholders received just one preliminary bid--from Korea Air Lines Co. (003490.SE).

Public-auction laws stipulate there must be two or more bidders for a sale to proceed.

It is the latest illustration of the difficulty of doing deals ahead of a the presidential election in December. Incumbent Lee Myung-bak is struggling with low public approval near the end of his term.

A stakeholders' meeting will now decide if the block will be offered again, shareholders for KAI, led by state-run Korea Finance Corp., said in a statement Friday without stating a date.

This outcome has been widely expected since mid-August when just one letter of intent to bid was received.

The 41.8% slice of Korea Aerospace was offered by Korea Finance, Hyundai Motor Co. (HYMLY), Doosan Group and Samsung Techwin Co. (012450.SE). Together they own 56.7%.

Korea Aerospace was formed in 1999 by the merger of the aerospace divisions of Samsung, Hyundai and the now defunct Daewoo following difficulties encountered during the 1997-98 Asian financial crisis.

The government failed three times in as many years to privatize the nation's largest financial holding company, Woori Finance Holdings (053000.SE). The plan to list state-owned KDB Financial Group before the year is also being opposed by some lawmakers.

Write to Kanga Kong at kanga.kong@dowjones.com

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Korea Aerospace Sale Falls Apart After Korean Air Is Only Bidder