Harim-JKL consortium, Dongwon compete to acquire HMM

[Courtesy of HMM]

Dongwon Group and a Harim Group-JKL consortium are poised to battle it out for South Korea’s largest container shipping line, HMM. The two groups were short-listed as final candidates after fellow contender LX Group dropped its plan for the bid, and a preferred negotiator for this deal is expected to be decided by the end of this month.

Sellers Korea Development Bank (KDB) and Korea Ocean Business Corporation (KOBC) intend to evaluate not only the price but qualitative metrics, such as the candidate’s funding plans, management strategies, and the direction they propose for the maritime industry’s development, as well.

According to sources on Thursday, among the current candidates, there is one bidder that has offered a bid surpassing the sellers’ anticipated selling price, set at over the 6 trillion won ($4.61 billion) range. KDB and KOBC calculated the anticipated selling price based on the weighted average of HMM’s stock prices over the past 30 trading days, which has risen beyond the earlier projected price, and there are now doubts in the market regarding the selling party’s commitment to the sale.

“A valid competition took place in the bidding, and a preferred negotiator will be promptly selected to sign a stock purchase agreement within 2023,” KDB said after Samsung Securities, the lead manager for the HMM sale, closed the bid application.

Reports suggest that the sellers calculated the anticipated selling price based on the weighted average stock price of HMM over the recent 30 trading days. While the average price of HMM stands around 15,300 won, the value of the targeted 57.9 percent stake for sale amounts to about 6.1 trillion won and the anticipated price will also include a premium for management rights. Even with a modest premium of 10 to 20 percent, the total selling price for HMM could surge to the 6.7 trillion to 7.3 trillion won range.

Potential buyers have assessed that a bid of around 5 trillion won would be suitable due to the remaining perpetual bonds held by the sellers, totaling 336 million shares. If all these are converted into stocks, the stake percentage of the targeted 398.79 million shares for sale would decrease from 57.9 percent to 39 percent. Some contenders hesitated to participate until the last moment due to this discrepancy in price evaluation, but with KDB’s inclination towards a higher valuation, the final candidates, who have shown a strong commitment to the bid, seem to be all-in. With multiple contenders in the game and at least one bidder exceeding the anticipated price, the deal appears to have steered clear of ending in failure.

Harim Group has emphasized that it could grow into a leading national flag shipper encompassing containers and bulk by acquiring HMM. Meanwhile, Dongwon Group has highlighted the potential acquisition’s ability to transform itself into an integrated logistics company connecting land logistics, ports, and maritime transportation.