PUBLISHED JUL 26, 2023 3:55 PM BY THE MARITIME EXECUTIVE
Four bidders have emerged as potential buyers from HMM as the first round of the process begins in South Korea. Media reports are suggesting that the government favors one of the largest conglomerates to take control of the shipping company. They appear to be seeking to encourage more companies to enter the process.
The media reports said that Samsung Securities, which is conducting the bidding process, has received initial registrations from two shipping companies, SM Group and Harim, the largest investor in Pan Ocean, another Korean shipping line. In addition, two conglomerates with operations in the logistics business, LX Holdings and Dongwon Group, are also reported to have registered in the bidding.
The government-controlled banks, Korean Development Bank and Korea Ocean Business Corporation, announced last week that their advisors had said it was possible to proceed with the sale this year despite the downturn in global shipping markets. Collectively the two banks hold approximately 40 percent of the shares of the company, but with their convertible perpetual bonds, the ownership stake could rise to approximately 75 percent of HMM, if everything was converted into shares.
The current value of the 40 percent equity shares is set at $3.9 billion, although the banks have indicated in their announcement that the plan would be to sell approximately 58 percent by converting a portion of the bonds. They said they would consult with the winning bidder to determine a plan to sell the remaining bonds in a means not to disrupt the market. If all the bonders were converted, at current market prices the stake in HMM would be valued at nearly $8 billion.
The chairman of KDB previously told reporters that several candidates had shown interest in acquiring HMM, without naming any potential bidders. They are looking for a large Korean company to take control of HMM seven years after the government bailout of the former Hyundai Merchant Marine.
SM Group told reporters in an interview that it was prepared to invest up to approximately $3 billion in a plan to merge HMM with its much smaller SM Line. Combined the goal is to create Asia’s largest carrier. HMM is currently the world’s eighth-largest container carrier with approximately 800,000 TEU of capacity, significantly behind COSCO, Evergreen, and ONE. HMM also operates a small fleet of dry bulk carriers and tankers plus has said it would be interested in reacquiring its form LNG business, Hyundai LNG Shipping.
Harim, which calls itself global food and agribusiness with its primary operations in poultry farming, is reported to have also registered to enter the bidding. Seven years ago, with backing from the JKL Consortium, Harim acquired Pan Ocean, a Korean shipping company established in 1966 operating dry bulk and later oil tankers. Dry bulk remains the largest portion of the operation accounting for nearly 70 percent of the business. The company is reported to have more than 80 bulkers as well as small operations in containerships, tankers, LNG, and heavy lift. The reports are that Harim is again partnering with the private equity firm JKL to make a bid for HMM.
The other two companies that have registered so far for the bidding are both involved in logistics operations. LX has a global logistics company as well as chemical, semiconductors, natural resources, and low e-glass. Dongwon had operations in logistics and also runs a container terminal in Pusan. The company also has operations in food, construction, and packaging materials manufacturing.
As part of the process, potential bidders register with Samsung Securities receiving the information packet. Preliminary bids for HMM are due by August 21. The banks plan to select a winner and negotiate a final agreement with the company. They hope to complete the sale of HMM before the end of 2023.
Reference: https://www.maritime-executive.com/article/four-companies-in-shipping-and-logistics-emerge-as-bidders-for-hmm