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Speculation about a possible union of South Korea’s two ocean-going liner operators has grown after SM Merchant Marine (also known as SM Line) extended its stake in HMM, and could increase its share further this year.
On 29 December, SM Line, which the Samra Midas (SM) group formed in 2016 after acquiring the remaining operations of bankrupt Hanjin Shipping, acquired an additional 613,438 shares in HMM for $14m, bringing its holding to over 2.41m shares, or 0.49%.
Another SM company, bulk carrier operator Korea Shipping (formerly Samsun Logix), acquired by SM in 2017, holds over 2.15m HMM shares, a 0.44% stake, which means the SM group now owns 0.93%.
SM downplayed talk of acquiring HMM, insisting that SM Line’s share purchase was a pure investment. SM Line did not respond to The Loadstar’s request for comment.
The South Korean government became a shareholder in HMM in 2016, with a debt-for-equity swap to save the company from bankruptcy, and intends to dispose of its stake this year.
Xeneta’s chief analyst Peter Sand told The Loadstar that, while liner operators had been engaged in vertical integration by acquiring logistics companies, any more consolidation among the carriers seems to be off the table.
But he added: “In South Korea, it is different. For the government to prop-up a distressed flagship carrier and SM Lines cancelling an IPO at the last minute seemed odd.”
SM Line withdrew its stock listing in November, claiming lukewarm interest from investors, but Mr Sand said that when it came to container shipping in South Korea, politics played a significant role. And he said while SM Line’s interest in HMM was insignificant in value, it was symbolic.
“It surely brings SM Line into the circle of investors to consider if the government’s stake in HMM is to be sold.”
Linerlytica analyst Tan Hua Joo told The Loadstar that, while the SM group had been seen as a ‘white knight’ in South Korea’s maritime industry, HMM was no longer in need of financial aid.
Mr Tan said: “I would not rule out further share purchases by SM Line, as HMM is relatively undervalued at this point. It would make sense for SM Line and HMM to be merged, as both of these lines compete in the same markets.”
The government, through policy lenders Korea Development Bank and Korea Ocean Business Corp, has holdings of around 44% in HMM, but this could exceed 70% as these institutions hold convertible bonds, which can be transferred into HMM shares.