Value context and insight. lkm@koreatimes.co.kr
Shares of Harim Holdings soar, Pan Ocean fall after HMM acquisition announcement
HMM container / Courtesy of HMM
By Lee Kyung-min
Shares of Harim Holdings and its shipping subsidiary Pan Ocean, moved in the opposite direction, Wednesday, after investors showed different expectations for the poultry processor acquiring an over 57 percent stake in HMM, the country’s largest shipping firm, for 6.4 trillion won ($4.9 billion).
According to the Korea Exchange, Pan Ocean’s stock price ended at 4,000 won, down 95 won, or 2.32 percent, from the previous session. The figure was a further fall from 4,095 won a day earlier.
Harim’s share price soared for the two consecutive days. It ended at 8,800 won, up 810 won, or 10.14 percent, from the previous session.
Harim shares surged after buyers anticipated the country’s largest shipping company would strengthen its corporate profit, as ascertained by Harim’s rank rising to the 10th largest conglomerate in the country by assets, up from the current 27th.
Pan Ocean shares took a dive due to concerns that part of the 6.4 trillion won will be drawn in the form of equity financing. The process of raising capital through the sale of shares occurs when companies need funds. The method almost always results in share devaluation, a source of major frustration for current shareholders.
Market watchers say at least 2.4 trillion won will be needed to fund the acquisition, provided by Pan Ocean through permanent bond issuance. The Harim subsidiary is expected to source from cash reserves, and increase capital in its own holdings and liquidate assets.
“Pan Ocean shares are falling because of the high possibility that the current shareholders will suffer low valuation,” Daishin Securities researcher Yang Ji-hwan said.
The brokerage strengthened the underweight position for Pan Ocean and lowered the target price to 4,500 won, down from the previous target of 4,555 won.
Hi Investment & Securities researcher Bae Se-ho said the acquisition of HMM will continue to increase downward pressure for Pan Ocean shares.
“Pan Ocean shares are likely to trade lower in the short term,” Bae said.