KDB to select advisor for HMM stake sale

KDB to select advisor for HMM stake sale [Image source: HMM]

The South Korean government is expected to embark on the process to privatize the country’s largest shipping company HMM Co. with hopes to complete the sale before the shipping industry struggles further from a collapse in ocean freight rates.

According to multiple sources from the investment bank industry on Sunday, Korea Development Bank (KDB) will soon send out requests for proposal (RFPs) to select a consulting firm for the sale of HMM, formerly known as Hyundai Merchant Marine. Sources note that KDB is highly likely to name an advisor this month, although the bank did not confirm any “details.”

The advisor, once selected, will review the best sales method and price and assess HMM’s value. KDB and Korea Ocean Business Corporation, which own 40.7 percent of stake in HMM, will discuss further details before they finalize the timeline, sources said.

The stakeholders may want to accelerate the HMM sale before the shipping industry boom that led HMM normalization comes to an end.

The Shanghai Containerized Freight Index (SCFI), which measures sea freight rates based on 15 routes, fell 22.86 points on Friday to 1,006.89 from a week ago. That is an 80 percent year-on-year fall from 4,980.93.

The shipping industry is seeing smaller freight volumes as the recent high interest rates and the sluggish global economy are starting to both pick up. As lower sea freight rates are likely to lead to lower corporate earnings at HMM, HMM’s stakeholders are hoping to divest its holdings.

Potential buyers include Hyundai Glovis Co., POSCO, LX Group, and Harim Co.

“The shipping industry has rebounded after a long recession thanks to higher fares, and is now generating profits,” said an unnamed industry source. “HMM is a good investment for large companies as it will help them stably secure cash.”

POSCO Holdings Inc. and Hyundai Glovis have so far expressed that they are not reviewing the purchase of HMM.