Korea’s HMM to take part in the race to buy Hyundai LNG Shipping

Hyundai LNG Shipping Co. [Courtesy of Hyundai LNG Shipping]

HMM Co., South Korea’s largest shipping company, will join the race to acquire Hyundai LNG Shipping Co. to prevent the country’s largest liquefied natural gas shipping company from being acquired by a foreign investor.

According to multiple sources from the investment bank industry on Thursday, HMM has expressed its intention to the selling side to take part in the final bid to buy LNG Shipping.

“HMM has notified IMM Private Equity Inc. and the sales advisor its intention to participate in the final bid and sales due diligence,” said an unnamed official from the investment bank industry.

HMM is expected to submit related documents as early as later this month or early next month at the latest.

IMM PE and IMM Investment Corp., the largest shareholders of Hyundai LNG Shipping, have been engaged in the sale of the company since March when they launched a preliminary bid. Citigroup Global Markets Korea Securities Ltd., the lead manager in the sale, is largely expected to allow HMM the opportunity to conduct due diligence.

“We are considering multiple measures with regard to taking part in the Hyundai LNG Shipping bid, but decisions have not been made yet,” said an unnamed official from HMM.

Four foreign companies from the U.S., U.K., Greece and Denmark have expressed intentions to take part in the bid. This raised concerns that Korea’s largest LNG carrier may be sold to a foreign capital.

An industry official who asked to be unnamed said that “HMM’s participation comes as it is aware of the negative public opinion on Hyundai LNG Shipping being sold overseas.”

HMM, formerly known as Hyundai Merchant Marine Co., had initially owned Hyundai LNG Shipping. The company, however, sold the gas carrier division to IMM for about 500 billion won ($375.7 million) in 2014 as it struggled with financial difficulties.

The largest shareholder of Hyundai LNG Shipping is currently a consortium of IMM PE and IMM Investment, followed by Daishin Private Equity Co. that bought new shares of the LNG carrier worth 150 billion won in April.

IMM is known to have sought for a local buyer over the past several months given the impact Hyundai LNG Shipping has on the local LNG value chain.

The private equity is also known to have made progress in a deal with HMM last year but the discussion fell through.

HMM Co. headquarters’ lobby [Photo by Han Joo-hyung]

HMM is opting to buy Hyundai LNG Shipping to overcome the structural limits of a container fleet that is excessively volatile in terms of profit to macro-economic environment.

HMM has the operations know-how, sources also said, as it previously had the gas carrier division.

HMM is also seeking to buy Hyundai LNG Shipping as it is restricted from advancing into the LNG carrier business until 2030 under a clause that prohibits competitive business, which was signed with IMM when HMM sold its gas carrier division.

Potential buyers of Hyundai LNG Shipping, in the meantime, are focused on the growth prospect of the company.

Hyundai LNG Shipping has been expanding its overseas customer base by signing a long-term transportation contract with Malaysia’s state-run energy company, Petroliam Nasional Bhd. and Spanish multinational energy and petrochemical company Repsol S.A. in 2021.

The gas carrier posted 398.1 billion won in sales last year. Its earnings before interest, taxes, depreciation and amortization (EBITDA) reached 48.5 billion won.

Hyundai LNG Shipping’s largest customer is Korea Gas Corp., which is the world’s single-largest user of LNG.

Hyundai LNG Shipping’s fleet of vessels are all under a long-term transportation contract of up to 20 years, allowing the company to be relatively less affected by the external changes and global macro-economy environment such as interest rates, exchange rates and oil prices.

The environmental aspects of LNG have also been arising due to the regulations of the International Maritime Organization. Korea is also equipped with a sound shipping ecosystem, such as finance, shipbuilding and workforce.

The final bid for the sale of Hyundai LNG Shipping is expected to take place at the end of May or early June after the potential buyers from home and abroad conduct due diligence.

Foreign bidders are known to have proposed to pay about 500 billion won. The seller is expected to comprehensively review the bidders’ LNG carrier operations know-how and impact on the local energy security.