Indifference to M&A
According to the business world on October 23, the government and creditors announced various M&A benefits such as collective purchases, “buy one, get one” packages, raising funds and discounted prices in order to sell off M&A offerings in the shipbuilding and shipping sectors. Nonetheless, few companies have expressed interest in buying them. HMM which has become Korea’s one and only global shipping firm began to consider taking over global routes from Hanjin Shipping but continues to brood over the takeover of the routes prior to handing in a letter of intent on October 28.
HMM is thoroughly studying practical benefits from taking over the Korea-Americas routes from Hanjin Shipping through internal consulting. “A few months have passed since HMM barely ride out a crisis by lowering its debt ratio to the 200% level via painstaking restricting after separating from the Hyundai Group which fell into a financial trouble,” said a representative of the shipping industry. “HMM has no choice but to be prudent about acquiring the routes as they may face another crisis as they hurriedly began to take over them at a time when shipping market conditions are not favorable.”
The pressed government and creditors came up with exceptionally good conditions for the sell-off of Hanjin Shipping. They are encouraging three mid-sized shipping companies -- Korea Marine Transport Co., Sinokor Merchant Marine Co. and Heung-A Shipping Co. –- to take part in taking over global routes from Hanjin Shipping with HMM. But those mid-sized shipping firms are skeptical about the takeover, saying, “It is practically impossible.”
The government even gave a condition that it will revise law to enable shipping companies to use ship funds for building ships as funds to take over the routes from Hanjin Shipping. It means that the government will allow shipping firms to spend ship funds on the acquisition of Long Beach Terminal, a lucrative core asset of Hanjin Shipping’s Korea-North America route. On October 14, Hanjin Shipping announced that it will sell off business rights to its Asian and North American routes, seven overseas affiliates, five containerships and employees in charge of routes.
More clouds are cast on M&As of shipbuilders which are bigger than shipping companies. The court began to sell off STX Offshore and Shipbuilding under court receivership and STX France as a package. The court will allow a buyer to take over the two companies at one stroke or one by one.
It is said that Hyundai Heavy Industries and Samsung Heavy Industries are picked as possible buyers of STX Offshore and Shipbuilding. But actually, neither of them expresses any interest in taking over STX Offshore and Shipbuilding. They say that they cannot receive another burden as they have not finished their internal restructuring yet.
The most unsalable offering is Daewoo Shipbuilding and Marine Engineering (DSME) with the worst financial problem. 3.2 trillion won has been injected into DSME for its survival since October of last year. The troubled shipbuilder needs one trillion won more to get out of the woods. It is generally said that under the continuing new order cliff, no firm can take over DSME. Finally, DSME will be liquidated or find ways to get on its feet. Within this month, the government will announce a big deal plan for the Korean shipping industry and decide the fate of DSME.