News / HMM sale fails due to differences over management rights

HMM’s sale to the Harim Group-JKL Partners consortium has been called off.

Another round of discussions with the South Korean flagship carrier’s major shareholders, Korea Development Bank and Korea Ocean Business Corp, broke down just after midnight, Seoul time.

After the Harim-JKL consortium was selected as the preferred bidder for the 57.9% stake in HMM held by KDB and KOBC in December, both sides should have agreed the sale details by 23 January.

Initial discussions failed to produce agreement and were postponed until yesterday, but no resolution was reached. The parties continued negotiating through the night, hopeful of completing the sale.

But those efforts came to naught when KDB and KOBC announced: “During the seven-week negotiation period, we worked diligently on mutual trust, but the negotiations ultimately broke down due to differences of opinion on some issues.”

The consortium of Harim Group, a poultry processor that took over dry bulk outfit Pan Ocean in 2015, and JKL, a private equity investment firm, offered around $4.9bn for the shares. A sticking point seemed to be the KRW1.68trn ($1.26bn) convertible bonds held by KDB and KOBC.

If the bonds are exchanged by 2025, Harim-JKL’s stake could be diluted to 38.9%, and the state-controlled organisations’ holding increased to 32.8%, leaving just a gap of just 6.1 percentage points between them. Even if KDB and KOBC were no longer the majority shareholders, they would retain management rights, including being entitled to appoint independent directors.

Harim Group expressed regret at the withdrawn sale. It said: “Negotiations weren’t easy, as we had a different position from the sellers. It’d be difficult for any private company to accept a deal that produces only the largest shareholder without guaranteeing actual management rights.”