HMM attracts major suitors for $3.9 billion buyout

Industry

HMM attracts major suitors for $3.9 billion buyout

Published: 22 Aug. 2023, 17:39 Updated: 22 Aug. 2023, 17:55

SEO JI-EUN
seo.jieun1@joongang.co.kr

HMM's Hamburg container ship [YONHAP]

Three Korean firms — Harim Holdings, Dongwon Group and LX Holdings — and German shipping company Hapag-Lloyd, have expressed an interest in acquiring HMM, Korea's largest shipping company, in a buyout deal worth 5 trillion won ($3.9 billion).

The preliminary bidding for HMM's acquisition closed on Monday afternoon, with the noted companies reportedly participating, according to sources from investment banking. Among them, Harim formed a consortium with the private equity fund operator JKL Partners in the preliminary bidding.

The sale involves a total of 399 million shares in HMM held by the state-run Korea Development Bank (KDB) and the Korea Ocean Business Corporation. This includes shares converted from perpetual convertible bonds (CB) and bonds with warrants (BW). The minimum expected sale price for HMM is approximately 5 trillion won.

Following the preliminary bidding, KDB, HMM's main creditor, will assess the eligibility of the companies as potential acquirers. Successful candidates will engage in due diligence to evaluate the value of HMM. The companies which qualify will then proceed to the formal bidding phase, with the aim of finalizing the sale within the year.

In light of concerns that the sale of the nation's largest shipping firm to a foreign entity could undermine local maritime industry competitiveness and result in capital outflow, KDB is leaning toward domestic buyers.

Yet industry insiders suggest that domestic companies in the preliminary bidding might face challenges around the acquisition due to a lack of cash assets to fund the deal. LX, while being the most liquid, holds assets totaling around 2.4 trillion won. Harim Group's liquidity stands at approximately 1.5 trillion won, while Dongwon Group's holdings amount to roughly 600 billion won.

The three Korean groups, stemming from the food and trading sectors, could leverage synergies with HMM through their related businesses.

Harim, best known for its poultry products, is the parent company of Pan Ocean, the country's largest dry bulk shipping company, thereby extending its reach into grain distribution. Canned tuna giant Dongwon owns subsidiaries in land logistics through Dongwon Loex and port operations through Dongwon Pusan Container Terminal. LX has affiliates in diverse sectors such as trading, semiconductors and the manufacture of building materials, such as housing trading arm LX International and logistics arm LX Pantos.

On the international front, Germany's Hapag-Lloyd stands as the fifth-largest shipping company globally.

SM Group and Global Sae-a, once interested in HMM's acquisition, chose not to participate in the preliminary bidding.

In an earlier interview with the local media, Chairman Woo Oh-hyun of SM Group had suggested a bid of 4.5 trillion won for the acquisition of HMM. However, its choice to abstain from the HMM purchase is attributed to the inclusion of perpetual bond conversion in the sale announcement, aligning with Woo's previous statement that it would opt out if perpetual bond conversion was incorporated into the sale terms.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]