Germany's Hapag-Lloyd fails to make HMM acquisition shortlist

[HMM]

Hapag-Lloyd, a German shipping company, has failed to make the shortlisted bidders for the acquisition of HMM, according to local media reports, a decision reflecting concerns surrounding the sale of the country's largest shipping firm to a foreign entity.

HMM's main creditor, the Korea Development Bank (KDB), declined to confirm the reports, saying that no final decision has been reached yet.

The potential departure of Hapag-Lloyd has narrowed down the contenders to a three-way showdown of Korean firms, involving the Harim-JKL Partners consortium, Dongwon Group and LX Holdings.

The shortlisted bidders will be announced as early as Thursday.

Hapag-Lloyd's involvement had stirred debate around potential capital outflow if the only national shipping firm ends up in foreign hands.

The potential inclusion of Hapag-Lloyd in the shortlist was met with worries that it might lead to the premature leak of critical information before the official evaluation process for HMM even begins.

Yet Hapag-Lloyd has the most the sufficient cash resources among the preliminary bidders. While the expected selling price for HMM is around 5 trillion won ($3.9 billion), Hapag-Lloyd boasts liquidity of $10 billion as of the end of June.

Conversely, other Korean contenders like Harim, Dongwon and LX possess cash reserves ranging around 1 trillion won, implying a reliance on external funding. They are currently exploring partnerships with securities firms and financial institutions to secure necessary funding.

Following news of Hapag-Lloyd's omission, minority HMM shareholders who were preparing statements in favor of Hapag-Lloyd's acquisition have voiced their disappointment.

Leaving out the world's fifth-largest shipping company from the shortlist is equivalent to missing the opportunity to recoup trillions of won of public funds and suggests a breach of duty, some minority shareholders say. Despite the potential harm on minority shareholders, KDB has proceeded with converting its perpetual bonds, including convertible bonds (CB) and bond with warrants (BW), into shares upon completion of the sale of HMM. Given the same logic, arguments emerged suggesting that Hapag-Lloyd, with its robust financial strength, should also have secured a spot on the shortlist.

The shortlisted companies will be granted a two-month window for due diligence. After the evaluation period, a preferred bidder will be selected by November, eventually culminating in the signing of stock purchase agreements (SPAs), and concluding the entire selling process by year-end.

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