News / Pan Ocean parent Harim partners with PE firm in bid for HMM

South Korean agri-food business Harim Group, the largest shareholder of shipping company Pan Ocean, has joined the race for HMM.

Pan Ocean is South Korea’s largest dry bulk shipping company, but also operates 11 containerships deployed on intra-Asia routes.

Last week, Woo Oh-hyun, chairman of Samra Midas, parent of HMM compatriot carrier SM Line, was the first to announce interest in South Korea’s flagship box line.

The following day, HMM’s two largest shareholders, Korea Development Bank and Korea Ocean Business Corp, sought bids for their combined 57.87% stake (including the exchange of convertible bonds), and media reports suggest the price could be as high as KRW10 trillion ($7.8bn).

Harim and South Korean private equity investment firm JKL Partners teamed to submit a bid yesterday.

This mirrors the takeover of Pan Ocean, then under court protection, in 2015 by Harim and JKL for $900m. In June 2018, by when Pan Ocean was back in profit, JKL cashed out by selling its shares to Harim, realising a $140m profit.

Meanwhile, SM Group began buying HMM shares in 2021 and, by 7 July this year, held a 6.56% stake, making it HMM’s third-largest shareholder, after KDB and KOBC.

While Mr Woo says he will not pay more than $3.5bn for HMM, the hefty price tag does not appear to bother Harim, which is expected to rely on JKL for some of the finance.

A source told The Loadstar the group planned “to maximise synergies by acquiring HMM, after acquiring Pan Ocean. In terms of funds, we have enough live ammunition ready”.

Linerlytica analyst Tan Hua Joo, however, believes neither Harim nor SM Group could offer a good price for HMM. He told The Loadstar: “Neither of them are seen as preferred candidates within the Korean establishment. There remains a big gap in the sellers’ price expectations and what the two shipping groups are prepared to pay for HMM. Although there are some synergistic benefits, the scale of SM Line’s container shipping operations is too small, relative to HMM.”

Mr Tan added: “Pan Ocean has only a limited presence in the container markets, and synergies with dry bulk operations are very limited.”

Indeed, with just four dry bulk ships, HMM’s operations there are a fraction of that of Pan Ocean, which has 81 vessels.