Negotiations on the sale of South Korea's top container shipper HMM break down
Negotiations on the sale of South Korea's top container shipper, HMM Co., to a local consortium fell apart due to differences over some issues, creditors said Wednesday, according to Yonhap.
Two state agencies -- the state-run Korea Development Bank (KDB) and the Korean Ocean Business Corp. -- had been in talks with the Harim-JKL Partners consortium since it was picked as the preferred bidder in late December.
Main creditor KDB and the corporation had planned to conclude the talks by Jan. 23, but postponed the deadline until Feb. 6.
The two institutions own 57.9 percent of HMM and 1.68 trillion won (US$1.26 billion) worth of perpetual bonds issued by HMM, for which they can exercise a call option this year and in 2025.
Market watchers said the KDB and the corporation are unlikely to restart the sale process for the time being, given the uncertainties over the maritime industry's situation.
Harim Group owns Harim Co., the country's largest poultry-processing company, and JKL Partners is a major private equity fund.
In 2013, KDB injected 6.8 trillion won in public funds into troubled Hyundai Merchant Marine, HMM's predecessor, which went bankrupt and was placed under KDB control three years later.
In a bid to keep Hyundai Merchant Marine afloat, the government set up the Korean Ocean Business Corp., which helped the shipper place orders for 20 very large vessels to boost its competitiveness.
The company was renamed HMM, and it posted its first profit in nine years in 2020.
In 2022, the container shipper posted record earnings thanks to a post-pandemic recovery in demand and rising shipping rates. Sales reached 18.6 trillion won, with operating income coming to 9.9 trillion won.
HMM's strong performance prompted the KDB and the state corporation to kick off the process of selling their stakes in July last year.
The Harim-led consortium beat Dongwon Group in the final bidding for HMM, offering to pay 6.4 trillion won for the stake, which KDB acquired in a debt-for-equity swap seven years earlier.
But suspicions flared over its cash reserves and ability to raise funds for the takeover. Harim's assets hover far below those of HMM.
Harim and JKL Partners had announced they would secure cash for the acquisition by selling stock and bond holdings, issuing perpetual bonds and conducting a rights issue by Harim's bulk carrier unit.
Harim voiced regret over the breakdown of the talks. "It is regrettable that the sales negotiations have resulted in failure," the company said in a statement.
Harim had demanded such takeover terms as a limit on HMM's cash dividends and a ban on the sale of stakes for a certain period, which the sellers refused to accept.
Despite the failure of the acquisition talks, Harim said it will step up efforts to boost the competitiveness of the local shipping industry through its bulk carrier unit.
Harim Group owns Pan Ocean Co., South Korea's leading bulk carrier, with a fleet of 301 vessels and an annual cargo capacity of 100 million tons.
HMM's two labor unions of seamen and longshoremen hailed the large shareholders' decision to end the talks, calling it a forward-looking move for the South Korean shipping industry.
Citing Harim's insufficient funding plan and a lack of financial soundness, the trade unions have strongly opposed Harim's proposed HMM acquisition.
The unions canceled a planned strike against Harim's HMM takeover, vowing to do their utmost to actively cooperate in "a pan-national discussion and come up with a constructive alternative."
HMM shares closed 0.42 percent down at 19,080 won ($14.4) on the Seoul bourse Wednesday, far underperforming the broader Korea Composite Stock Price Index's 1.3 percent gain. Shares in Pan Ocean shot up 21.1 percent to 4,335 won on the main bourse, with Harim tumbling 16.2 percent to 3,135 won on the secondary market.
