Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Harim fails in bid to acquire Korea's top container shipper HMM
An HMM employee passes by an electronic board on the wall of the company's head office in Seoul in this Nov. 23, 2023 photo. Newsis
By Park Jae-hyuk
Future of ailing shipping company remains uncertain
HMM's creditors have opted against selling Korea's largest container shipping company to Harim Group, the nation's biggest poultry processing company. The decision amplifies uncertainties surrounding HMM's privatization, particularly in the face of a pessimistic outlook for the logistics industry.
After hours of negotiations stretching until the midnight deadline, Korea Development Bank (KDB) and the Korea Oceans Business Corp. (KOBC) announced at 12:05 a.m. on Wednesday that seven weeks of talks between the two major HMM shareholders and the preferred bidder had ultimately collapsed due to discrepancies over certain issues.
Both sides were reportedly unable to come to terms regarding Harim's request to waive a condition that the buyer must hold HMM shares for at least five years, particularly concerning JKL Partners, a private equity firm that joined the consortium led by the poultry processing company. Harim's attempt to secure investments from JKL was prompted by its failure to obtain sufficient funds for the acquisition.
It was reported that KOBC refused the proposal of reducing the period to three years.
While KDB has been quick to pursue the sale of HMM from a financial standpoint, the Ministry of Oceans and Fisheries, responsible for overseeing KOBC, has shown reluctance in actively seeking a new owner for the shipping firm. Citing potential adverse effects on the domestic shipping industry, the ministry has maintained a cautious stance. It reiterated the need for prudence on the part of HMM's creditors when they resume the sale process.
Unionized workers at HMM, who have opposed Harim's selection as the preferred bidder due to questions about its financial capacity, welcomed the decision and retracted threats to launch a strike.
“Due to the preferred bidder’s unclear fundraising plan and its refusal of the minimum level of the government’s supervision of management, shipping industry officials have continuously expressed concerns that the deal could be a recurrence of Hanjin Shipping’s liquidation in 2017,” the workers said in a statement.
Harim attributed the breakdown of the deal to the sellers.
“Any private company will find it difficult to accept a deal that grants only the status of the largest shareholder without ensuring substantial management rights,” Harim said in a statement. “Despite the breakdown of the acquisition talks, we remain committed to intensifying our efforts to enhance the competitiveness of the local shipping industry, particularly through our bulk carrier unit, Pan Ocean.”
Due to the failed bid, Harim’s stock price closed at 3,135 won ($2.4) on Wednesday, down 16.18 percent from the previous session, while Pan Ocean’s share price rose 21.09 percent to 4,335 won. HMM’s stock price, which temporarily plunged to 17,500 won from 19,160 won on Wednesday morning, bounced back and closed at 19,080 won, down 0.42 percent.
Market observers are closely monitoring whether Dongwon Group will make another attempt to acquire HMM. The food company, which specializes in canned tuna, participated in the primary bid but lost to Harim in the race to become the preferred bidder.
POSCO Group, which will soon replace its leader, and Hyundai Motor Group, are also mentioned as potential buyers, as the conglomerates have subsidiaries involved in marine transportation. Hanwha Group is another possible candidate because it recently unveiled plans to start a shipping business.
However, a worsening shipping industry outlook is expected to make the potential buyers remain skeptical about acquiring HMM, whose operating profit during the first three quarters of 2023 fell sharply to 542.4 billion won from 8.7 trillion won a year earlier.
German shipping firm Hapag-Lloyd’s plan to leave THE Alliance is also unfavorable for HMM in the near future, as the Korean company is a member of the global shipping network.
HMM, formerly known as Hyundai Merchant Marine and a key subsidiary of Hyundai Group, came under government control in 2016 due to its escalating debt. After years of taxpayer-funded injections into the struggling shipping firm, HMM achieved its first profit in nine years in 2020.