News / Five S Korean firms showing interest in takeover of HMM

Five South Korean corporations have shown an interest in taking over flagship carrier HMM.

State-controlled finance institutions Korea Development Bank (KDB) and Korea Ocean Business Corp (KOBC) invited tenders to acquire their combined 57.87% stake in HMM.

Less than a month before bids close, on 21 August, LX Group, Samra Midas Group, Harim Group, Dongwon Group and Global Sae-A have reportedly received a prospectus from Samsung Securities, which is handling the HMM sale.

KDB and KOBC are said to be hoping to shortlist a buyer by November.

Bidders are expected to work with private equity players to raise funds, as the HMM shares held by KDB and KOBC are estimated to cost between $3.8bn and $7.6bn.

LX Pantos, a logistics spin-off from the LG chaebol, is seen as a government favourite to acquire HMM. Owning a fleet of container ships will generate synergies with its logistics. However, LX Pantos appears to be sitting on the fence for now. Sources said that the group had yet to begin serious negotiations with a financial backer. As of 31 December 2022 (the date of its latest accounts), LX Pantos has $369m in cash holdings.

Samra Midas, headed by founding chairman Woo Oh-hyun, was the first to confirm its interest in HMM, after spending more than a year buying its shares. SM Group entities, including HMM peer SM Line, now hold 6.66% of HMM’s stock, making it the third-largest shareholder. SM is expected to be able to raise up to $785m if it mobilises all its affiliates, according to South Korean media.

However, SM Group, which expanded its business through acquisitions, like SM Line (established from bankrupt Hanjin Shipping), Korea Line Corp, Korea Shipping Corp and Chang Myung Shipping, would need to take on substantial debt to come up with the $3.5bn it is prepared to pay for HMM. But this could be below the sellers’ valuation of their shares.

Dongwon, whose core business is deepsea fishing and seafood processing, is also involved in 3PL services and operates a container terminal in Busan. Headed by chairman and CEO Kim Nam-jung, parent Dongwon Industries has $361m of cash, as of 31 March, but this could be compensated by working with Korea Investment Holdings, a financial services group headed by Mr Kim’s older brother, Kim Nam-goo.

The latest to throw its hat into the ring, Global Sae-A, is said to be the world’s largest apparel manufacturer and exporter. Eyeing vertical integration with HMM by owning ships, its cash stood at $183m as of December 2022 (the latest figure available).

South Korean media, citing investment banking sources, reports that Global Sae-A is joining hands with compatriot investor IMM Private Equity, which sold it Tailim Packaging and Tailim Paper in 2019. Coincidentally, IMM owns HMM’s former LNG shipping unit, Hyundai LNG Shipping, sold by HMM for $375m in 2014.

In May, IMM, wanting to cash-out of Hyundai LNG, invited bids and HMM offered $233m, way below expectations and the sale was postponed. But if a Global Sae-A-IMM consortium was successful, HMM and Hyundai LNG could be reunited.