Will Harim's acquisition of HMM turn into winner's curse?

Harim Group is facing a bumpy road ahead for its acquisition of HMM from creditors led by the Korea Development Bank, due to the growing skepticism over the poultry processor’s capability to manage the nation’s largest container shipping firm, according to industry officials, Tuesday.

After Harim was selected on Monday as the preferred bidder to buy HMM by the first half of 2024, unionized sailors of the shipping company threatened to take all possible measures to prevent the deal.

“Considering Harim’s low capital adequacy ratio, HMM will turn into Harim’s safe that stores 10 trillion won ($7.7 billion) in cashable assets,” the union said, describing Harim as a “shipping company hunter.”

A group of HMM’s minority shareholders also denounced the latest decision as “ridiculous.”

Harim is said to have offered 6.4 trillion won for the acquisition, despite its holding of only 1.6 trillion won in cashable assets. The KDB also rejected Harim’s request to delay the planned conversion of perpetual bonds into equity for three years after the purchase, which could have allowed the buyer to enjoy up to 285 billion won in dividends.

As a result, Harim is reportedly trying to borrow a huge amount of money from a private equity firm named JKL Partners and Hoban Construction.

Amid high interest rates and shipping industry downturn, however, Harim’s plan has raised concerns over a potential setback in its investments in HMM after takeover.

Before the selection of the preferred bidder, Minister of Oceans and Fisheries Cho Seung-hwan told The Korea Times that the government wants a buyer that can enable HMM’s sustainable growth.

“Despite uncertainties over the shipping industry, the buyer should continue long-term investments to enhance HMM’s competitiveness,” he said.

Including the minister, shipping industry insiders expect the global economic slowdown to make the market condition much worse next year, although the recent invasion of Palestine by Israel temporarily raised the international container freight rates.

Harim acknowledged concerns over the slump in shipping industry, but the company expressed confidence of overcoming the difficulty through its prompt response to the market situation.

“Once we finish negotiations and sign the main contract, we will make HMM a stable and credible shipping company by creating a synergy effect with Pan Ocean, our group’s bulk cargo shipping subsidiary,” Harim said in a press release.

There remains speculation that Harim Group Chairman Kim Hong-kook’s close relations with President Yoon Suk Yeol may have led the company to defeat another bidder, Dongwon Group. Kim had worked at the Presidential Committee of National Cohesion until August and accompanied Yoon for his state visit to the Netherlands this month, citing cooperation with the European country in agriculture.