HMM takeover talks with Harim delayed over final details

HMM's container ship [YONHAP]

The official signing for the sale of HMM, Korea's largest shipping company, has been delayed due to disagreement between its main creditors and Harim, the preferred bidder of the 6.4 trillion won ($4.9 billion) deal.

Originally scheduled for Tuesday, the deadline for negotiations of the sale agreement has been extended by two weeks, as confirmed by Korea Development Bank (KDB), HMM's largest shareholder. The deadline has now been pushed to Feb. 6.

The delay in negotiations is attributed to both parties failing to reach an agreement on acquisition conditions, according to industry sources.

A consortium of Harim and Korean private equity firm JKL Partners reportedly demanded a three-year deferral in the conversion of perpetual bonds worth 1.7 trillion won into equity post-purchase, along with preemptive rights. If accepted, this delay is expected to maintain Harim’s stake at 57.9 percent, allowing the group to collect more annual dividends for three years — which could alleviate pressure on the smaller group to secure funds for the acquisition.

Moreover, Harim reportedly requested to limit the validity period of the sale agreement to five years. After this period, all clauses, including restrictions on HMM's cash dividends, a ban on selling stakes for a specified time, and the government's right to appoint HMM's outside directors, would be nullified.

Both parties declined to confirm whether these issues are part of the ongoing negotiations due to confidentiality.

HMM's main creditors — the state-run Korea Development Bank (KDB) and the state-held ship finance institution Korea Ocean Business Corp. (KOBC) — selected the Harim-led consortium as the preferred bidder on Dec. 18. This consortium is set to acquire their 398.8 million shares, equivalent to a 57.9 percent stake in HMM. Harim, a Korean poultry processor, anticipates synergies with its bulker line subsidiary, Pan Ocean, as HMM focuses on container ships.

If an agreement is not reached by the extended deadline, the HMM takeover will fall through.

"We remain optimistic about concluding the negotiations by Feb. 6," a KDB official told the Korea JoongAng Daily.

"[A two-week extension] is a natural part of the negotiation process," said a Harim official. "We're currently in talks to establish new conditions."

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