Harim, Dongwon compete to acquire HMM

A container ship owned by HMM / Courtesy of HMM

The aquisition of HMM, Korea's representative global shipping and logistics company, has become a two-way race between Dongwon Group and Harim Group, with the two joining the main bid that ended Thursday, according to Korea Development Bank (KDB) and inventment banking sources Friday.

The final winner will be announced by the end of this month at the earliest.

"The selection of the preferred bidder will typically take place a week or two from now, but KDB plans to expedite the process, aiming to conclude the stock purchase agreement by the end of this year," a KDB official told The Korea Times, Friday.

KDB and the Korea Ocean Business Corporation — HMM's largest and second-largest shareholders holding 20.69 percent and 19.96 percent stakes respectively — plan to conduct a comprehensive review of the financial conditions of Dongwon and Harim, their management capabilities and their strategic plans for operating the shipping business. They aim to complete the selection of the preferred bidder no later than early December.

The sale price of 398.79 million shares of HMM held by the bondholders is estimated to be around 7 trillion won ($5.3 billion), given the current HMM stock price and the premium of management rights. The key factor in selecting a preferred bidder is expected to be the stable financial capability of raising the necessary capital for the deal.

Earlier, the acquisition competition was expected to be a three-way race also including LX International. Yet, LX decided to withdraw from the bidding process, citing: "LX decided to abstain from the main bid based on a strategic assessment comprehensively considering market conditions, business environment as well as other factors."

Some market watchers have expressed concerns that the sale may not be followed through, considering the withdrawal of LX, which had been evaluated to have a relatively better funding-mobilization power compared to the other two.

Despite such concerns, both Dongwon and Harim are strongly expressing their determination to complete the race, highlighting that they have no problems mobilizing enough acquisition funds.

Dongwon Group, which has a business portfolio spanning seafood distribution, food service, construction and packaging, plans to raise the necessary capital by selling shares of its major affiliates or securitizing some of their assets, without the help of external financial investors. In relation to this, Dongwon Industries, the holding company of the group, said in its public disclosures that it is reviewing various measures, such as a paid-in capital increase or issuance of convertible bonds of its subsidiaries.

“The group had faithfully conducted due diligence and submitted our final bid. Now it's time to wait for the result of the preferred bidder selection," an official from Dongwon Group said.

Meanwhile, Harim Group, which has various leading businesses in the food and agricultural sectors including chicken processing, pork, feed production and dry cargo volume, is planning to proceed with its bid for HMM, centering around its shipping subsidiary Pan Ocean, which it acquired in 2015. Harim is expected to secure the necessary capital through the securitization of its assets and issuance of perpetual bonds. JKL Partners, the financial investor of the acquisition bid, also plans to supply some 3 trillion won.

"Participating in the HMM acquisition is to strengthen the value chain of the group’s major businesses, which is not only good for us but also important for strengthening national competitiveness," Harim Group Chairman Kim Hong-kook said in a press conference earlier this month. "HMM should be acquired by those who will do well in the future.”