Activist shareholders push for HMM sale to German giant

[HMM]

Shareholder activism has hit HMM, Korea's largest container shipper, as its minority shareholders are vocalizing a desire for the company to be acquired by Germany's Hapag-Lloyd.

According to local media reports, minority HMM shareholders are gathering proxy statements through online platforms and working on a statement endorsing the proposed Hapag-Lloyd acquisition of HMM. Certain members within the minority shareholder group have initiated communication with Hapag-Lloyd's headquarters in Germany.

The Korea Development Bank (KDB) and the Korea Ocean Business Corporation (KOBC) — HMM's main creditors — have opted to convert shares from their held perpetual convertible bonds (CB) and bonds with warrants (BW) after concerns about embezzlement controversies. However, proponents assert that if the financially stronger Hapag-Lloyd is sidelined from the shortlist, it could also potentially give rise to embezzlement issues, according to their viewpoint.

Hapag-Lloyd, the fifth-largest shipping company globally, holds liquidity amounting to $10 billion as of June, according to industry insiders. During the preliminary bidding phase for HMM, it has reportedly appointed Goldman Sachs as an advisor and submitted a more substantial bid compared to other contenders.

However, 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.

In a joint statement released last Wednesday, the Federation of Korea Maritime Industries and the Busan Council for Port Development highlighted potential worries about "the outflow of national assets" if HMM were to be sold to Hapag-Lloyd. The statement emphasized the non-monetary value of these assets, including Korea's container transportation infrastructure, terminals and the accumulation of shipping logistics expertise over decades.

The preliminary bidding phase for HMM concluded on Aug. 21 with submissions from three Korean firms — Harim Holdings, Dongwon Group and LX Holdings — and Germany's Hapag-Lloyd. With the buyout deal priced at around 5 trillion won ($3.9 billion), the three Korean contenders that participated in the preliminary bidding might face challenges around the acquisition due to a lack of cash assets to fund the deal.

The KDB is to unveil a shortlist of investment-qualified candidates by the end of the month.

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