HMM may look to buy back Hyundai LNG Shipping

HMM, Korea's largest container shipper, is considering acquiring Hyundai LNG Shipping in a move that could help prevent the largest domestic liquefied natural gas (LNG) shipping company from falling into the hands of a foreign entity.

Hyundai LNG Shipping's gas carrier, HLS Diamond [HYUNDAI LNG SHIPPING]

HMM, Korea's largest container shipper, is considering acquiring Hyundai LNG Shipping in a move that could help prevent the largest domestic liquefied natural gas (LNG) shipping company from falling into the hands of a foreign entity.

HMM, the former owner of Hyundai LNG Shipping, has expressed its intention to re-acquire the company, which is valued at up to 460 billion won ($344.4 million), according to sources from the investment banking industry. The final bidding, originally scheduled for later this month, has reportedly been postponed to early May to accommodate HMM.

HMM declined to confirm the reports.

"There is nothing we can confirm at this point," a spokesperson for HMM told the Korea JoongAng Daily on Friday.

Hyundai LNG Shipping currently stands as Korea's largest LNG tanker operator, boasting a fleet of 16 LNG carriers and six LPG carriers.

The company was previously a part of HMM, formerly known as Hyundai Merchant Marine, which faced financial difficulties and subsequently sold its LNG shipping unit to a consortium led by IMM Private Equity and its affiliate, IMM Investment, in 2014 for around 500 billion won.

Since the sale process began in March, several companies from the United States, Britain, Greece and Denmark have been shortlisted in the bidding to acquire Hyundai LNG Shipping.

This isn't the first time that HMM has been considered a potential acquirer of Hyundai LNG Shipping. It was reported that HMM came close to acquiring the company in late 2022, though the deal eventually fell through.

Despite the company's cautious approach, industry insiders believe that HMM is contemplating joining the bidding process, bowing to the government's concerns about the potential sale of the nation's top shipping company to a foreign entity.

Industry associations have recently issued statements opposing the potential foreign control of Hyundai LNG Shipping, citing the would-be threat to national energy security.

"The sale would result in the loss of decades of accumulated know-how related to strategic material transportation and long-term transportation rights contracts with Korea Gas Corporation," the Federation of Korea Maritime Industries wrote in a statement released on May 8.

Adding to the likelihood of HMM's buyback is a clause that prevents HMM from re-entering the LNG carrier business until 2029, which was included when HMM sold its gas carrier division to IMM. By reacquiring Hyundai LNG Shipping, HMM would be able to circumvent the business prohibition.

However, adding to the complications, the sale of HMM itself poses a significant challenge to the company's acquisition of Hyundai LNG Shipping.

After years of being controlled by the government, the owners of HMM are pursuing the privatization of HMM. As part of this endeavor, government-controlled banks have recently enlisted a team of financial advisors to oversee the sale of their stakes in HMM.

The prospective takeover of Hyundai LNG Shipping by HMM is expected to enhance HMM's already substantial market value, thereby introducing additional intricacies into the ongoing sale proceedings. With HMM presently valued at around 10 trillion won, the potential alteration in its corporate worth resulting from the acquisition of Hyundai LNG Shipping adds a burden to the sale process.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]