Harim vows to use HMM reserves to grow maritime industry

The poultry-focused food group explained that HMM's reserves will be used for the growth of Korea's maritime industry, denying speculation that Harim could use the proceeds for its own business.

Members of HMM's labor union show banners opposing Harim Group's acquisition of HMM [HMM SEA-BASED LABOR UNION]

Harim Group, the preferred bidder for the acquisition of HMM, announced its plans for the use of the shipping company's 10 trillion won ($7.71 billion) worth of cash reserves in response to growing doubts over the 6.4 trillion won deal.

The poultry-focused food group explained that HMM's reserves will be used for the growth of Korea's maritime industry, denying speculation that Harim could use the proceeds for its own business.

"Our firm belief is that HMM's cash assets should be prioritized to address the prevailing maritime industry downturn and ensure future competitiveness," Harim said in a statement released Tuesday. "Global shipping giants like MSC and Maersk own sizeable cash reserves for weathering industry challenges."

Tensions escalated after HMM's labor unions expressed concerns, holding a press conference on Dec. 21 and suggesting that Harim might tap into HMM's reserves through dividends. The unions demanded transparency in Harim's funding plan for the acquisition and urged the government to reconsider the sale.

"Given the anticipated economic challenges, it is desirable to boost HMM's competitiveness by keeping dividend payouts to a minimum," Harim said. The company pointed to past practices with Pan Ocean, the country's largest bulk carrier it acquired in 2015, where it withheld dividends over five years post-merger to enhance competitiveness.

Addressing rumors of a potential merger between Pan Ocean and HMM and business restructuring, Harim denied such claims.

"We believe in a management approach that encourages independent operations and fair competition among our subsidiaries, and numerous companies that joined the Harim Group through past mergers and acquisitions have maintained their original names, brands and products," Harim said. "If the acquisition goes through, both Pan Ocean and HMM will continue to preserve their traditions and corporate cultures under this shared framework."

"There hasn't been a successful acquisition of a container shipping company by a non-industry entity globally since 1980," said Professor Han Jong-gil from the department of East Asian Studies and Logistics at Sungkyul University. "The need to invest trillions of won to boost competitiveness to HMM, which holds a mere 3 percent of the global market share, adds to the apprehension of the acquisition by Harim."

BY SEO JI-EUN, KIM MIN-SANG [seo.jieun1@joongang.co.kr]