Is LX International preparing to buy HMM?

An HMM container ship / Courtesy of HMM

By Park Jae-hyuk

LX International's plan to increase its authorized shares has been viewed as a preparatory step to acquire the nation's leading shipping company, HMM, from the government by utilizing the money the trading firm will raise through the issuance of new shares, according to industry officials, Thursday.

Such speculation resulted mainly from LX Group's aggressive acquisition deals after its spin-off from LG Group, as well as possible synergy effects it can create through the acquisition.

Earlier this month, LX International sent a letter to its shareholders to ask them to grant approval at their general meeting later this month for the modification of articles of association, aimed at increasing the company's authorized shares to 160 million from 80 million. This is the first time since 1999 that the company has raised its authorized shares.

The decision came as the state-run Korea Development Bank (KDB) and the Korea Ocean Business Corp. (KOBC), which is under the supervision of the Ministry of Oceans and Fisheries, began moves to privatize HMM. Last week, the state institutions confirmed that they started looking for advisory firms for their planned sale of the shipping company.

An LX International spokesman did not confirm nor deny the speculation that the company seeks to acquire HMM.

The trading firm said in its letter to shareholders that it decided to revise its articles of association. This was in light of the necessity of capital increase for its continued pursuance of M&As and business expansion into nickel and renewable energy sources.

POSCO Group and Hyundai Glovis, both of which were also mentioned as potential buyers of HMM, officially denied the speculation during their respective conference calls.

Since KDB indicated its intention to privatize HMM, LX Group has been regarded as one of the strongest candidates to acquire the shipping company, because LX Pantos, a subsidiary of LX International, is one of Korea's leading logistics firms.

“If LX Group acquires HMM, LX Pantos is expected to create a synergy effect with the shipping firm,” a domestic securities analyst said on condition of anonymity.

Last November, it was also reported that high-ranking executives from LX and KDB had a meeting to discuss the sale of HMM, although the state-run bank later denied the news. In addition, some industry officials said that LX Group Chairman Koo Bon-joon showed interest in HMM.