News / 'Winner's curse'? Harim aims to turn HMM into a top-five box line

Harim Group chairman Kim Hong-kuk has ambitions to grow HMM into one of the world’s five largest shipping companies, after his group was preferred to take over South Korea’s flagship carrier.

Yesterday, Mr Kim said South Korea needed a shipping giant that could compete with the more established international shipping groups.

He emphasised Harim’s experience in achieving profitability at the country’s largest dry bulk shipping company, Pan Ocean, after acquiring it from reditor banks in 2015. And with Harim Group’s cash holdings of around $1bn, these were was said to be factors in persuading HMM’s state-controlled shareholders, Korea Development Bank and Korea Ocean Business Corp, to select Harim as the preferred buyer.

Formerly Hyundai Merchant Marine, HMM has been under the control of KDB since 2016, after swapping debts for equities. Last year, after the carrier achieved record profits due to the Covid-19-fuelled boom, KDB decided it was time to release control. Only Harim and Dongwon LOEX, the logistics unit of fishing group Dongwon, had submitted bids by the 23 November deadline. Both offered about $4.9bn for HMM.

Mr Kim said that marrying South Korea’s largest container shipping company with Pan Ocean would result in better competitiveness and substantial scale. He added: “We’re confident we will manage well because we focus on sustainability. When we took over Pan Ocean, people said it was a ‘winner’s curse’, but a year later, they said it was ‘God’s number’.”

He continued: “Our [domestic] shipping industry needs to be scaled up in order to compete with global shipping companies. Our motivation is for HMM-Pan Ocean to be among the top five shipping companies in the world.”

HMM recently diversified into the car-carrier segment, while bulk specialist Pan Ocean is also active in the LNG and intra-Asia container shipping markets. Both also have a minor presence in the oil tanker sector.

Shinhan Securities analyst Myung Ji-woon wrote today: “When HMM unites with Pan Ocean, a super-large shipping company will be created that encompasses containers and dry bulk. There is an expansion of tankers with the involvement of HMM, and it’s expected to increase competitiveness due to efficiency and scale expansion through integration with Pan Ocean. Pan Ocean has a high understanding of the industry and this means quick decision-making will complement the investment in HMM.”

Despite concerns of continuing oversupply in the container segment into 2024, Mr Myung believed HMM had accumulated enough cash to withstand a recession.

He wrote: “There’s a high probability that it won’t be as difficult as much as the market’s concerns. At least HMM’s performance won’t put a winner’s curse on Pan Ocean.”