News / HMM suitor Dongwon hits out at rival Harim's 'unfair' bid

Dongwon Group, a bidder for South Korea’s flagship container carrier, HMM, has accused rival suitor Harim Group of making an unfair bid.

Sources in South Korea’s investment banking sector said that, on Friday, Dongwon wrote to HMM’s largest shareholders, Korea Development Bank and Korea Ocean Business Corp, complaining about Harims request that KDB and KOBC refrain from exchanging their convertible bonds for more shares in HMM.

Dongwon said: “It appears that the Harim Group-JKL Partners consortium has requested a three-year moratorium on the conversion of HMM’s perpetual bonds held by the sellers. This violates the bidding criteria of submitting an acquisition price based on the total number of potential issued shares of HMM (approximately 1bn) by adding the conversion of perpetual bonds into shares.

“If we had judged that this was possible, we would have been able to offer a higher acquisition price.”

KDB and KOBC, representing the state, are selling what amounts to a 40.65% stake, which could rise to 57.87%, if KRW1trn ($742m) of bonds are converted to stocks. The HMM sale price is estimated between $3.5bn and $7.4bn.

HMM came under state control in 2016, after creditors led by KDB swapped debt for shares in the company. KDB now believes it is time for HMM to be weaned off state support, after the company achieved record profits during the Covid-fuelled boom.

Both Dongwon and Harim are understood to have submitted bids of KRW6.4trn ($4.8bn), according to Alphaliner. KDB and KOBC hope to choose a preferred bidder by year-end.

Check out this podcast clip of Jan Tiedemann, head analyst, Alphaliner, on why container lines are hoovering up port capacity worldwide post-pandemic

Harim Group, a South Korean poultry processor that acquired the country’s largest dry bulk shipping company, Pan Ocean, in 2015, claims the request is part of usual negotiations. It said: “We don’t necessarily mean to implement the clause that Dongwon is taking issue with. If we’re selected as the preferred bidder, there’s room for us to assess various terms of the acquisition.”

Dongwon, South Korea’s largest fishing group, hopes to achieve synergies between HMM and its 3PL and container terminal operations. The group, which operates a terminal in Busan port, used its logistics unit, Dongwon LOEX, to bid for HMM, instead of fishing unit Dongwon Industries.

Harim expects to expand Pan Ocean’s container operations, which are now focused on intra-Asia routes, while combining Pan Ocean’s bulk carrier fleet with that of HMM.