News / LX International may be rethinking its bid to take over HMM

LX Pantos

The takeover of HMM might go down to a two-way battle between Harim Group and Dongwon Group.

Sources in South Korea’s investment banking market are suggesting trading group LX International is having second thoughts about continuing its bid, due to pressure on its own finances and the challenging outlook for container shipping.

A representative of LX International told The Loadstar today the company “had not reached a resolution”. It, Pan Ocean parent Harim Group and South Korea’s largest fishing company, Dongwon Group, are shortlisted to acquire a majority stake in HMM being sold by Korea Development Bank and Korea Ocean Business Corp.

LX International had appointed local accounting firm Nexia Samduk as its advisor, with hopes that acquiring HMM would help it achieve synergies with its 3PL subsidiary, LX Pantos.

Itself a spinoff from the LG chaebol, LX has reported a poorer financial performance this year so far, with net profit for Q3 plunging 80%, year on year, to $36.2m, according to preliminary figures. Cumulative net profit for the first nine months was 60% lower year on year, at $205m, and earnings across the group’s core businesses, natural resources supply, trading and logistics, were all down.

On Friday, HMM itself disclosed plummeting earnings, with Q3 23 net profit falling 96% year on year, to KRW95bn ($70.2m). In the first nine months, cumulative net profit plunged 92% year on year, to KRW706bn ($521.8m).

Meanwhile, the chiefs of Harim and Dongwon have asserted they are staying the course in the race for HMM and have embarked on aggressive fundraising.

Harim CEO Kim Hong-kuk said last month that with private equity group JKL Partners, his company had the “perfect fundraising plan”. Subsidiary Pan Ocean has sold several tankers and its stake in Korean Air Lines’ holding company, Hanjin KAL. And Dongwon is initiating a public listing of its US tuna processing subsidiary, StarKist.

KDB and KOBC expect to name a preferred bidder this month and hope to conclude the sale by year-end. They plan to divest a 40.65% stake, which could increase to 57.87% if KRW1trn ($742m) of bonds are converted to stocks. The sale price is estimated between KRW5 trillion ($3.5bn) and KRW10 trillion ($7.4bn). The state took control of HMM after swapping debt for equity in 2016 and now feels it is time for the company to be released from taxpayer support.