HMM potential acquirers Harim and Dongwon as well as LX and the German shipping company Hapag-Lloyd are currently undergoing eligibility assessments for the acquisition of HMM, formerly known as Hyundai Merchant Marine. In the meantime, Korea Development Bank (KDB) and the Korea Ocean Business Corporation (KOBC) will select candidates to participate in the main bidding process later this week.
According to sources in the financial industry on Aug. 28, KDB is set to conclude the selection process for eligible acquirer candidates, known as the shortlist, for HMM’s sale later this month. However, it is reported that an official announcement will not be made like the preliminary bidding before. Harim, Dongwon, LX, and Hapag-Lloyd participated in the preliminary bidding that closed on Aug. 21.
As the selection of candidates approaches, there is a growing atmosphere of pressure directed towards the KDB. HMM’s small shareholders are reported to be collecting shareholder proxy forms online and preparing a statement in support of Hapag-Lloyd’s acquisition of HMM. They argue that, in order to maximize the recovery of public funds, KDB should provide Hapag-Lloyd with the opportunity to participate in the main bidding, which aligns with the KDB’s objective.
Excluding Hapag-Lloyd, Harim, Dongwon, and LX are reported to have insufficient financial resources. Consequently, they have formed financial investor (FI) consortia to participate in the bidding. In contrast, Hapag-Lloyd boasts a total liquidity of approximately US$10 billion (about 13 trillion won) as of June. It has sufficient internal funds to make the acquisition payment.
There are opposing voices in some quarters against the sale of HMM to Hapag-Lloyd. They argue that selling HMM, the largest container shipping company and the only domestic-flagged carrier in South Korea, to a foreign company would lead to capital outflow. The Korea Sea Journalists Association (KSJA) issued a statement on the same day, saying, “There is no need to debate the fact that selling national strategic industries to foreign companies is unacceptable.” Earlier, on Aug. 23, the Federation of Korean Maritime Industries and the Busan Port Development Association also issued a statement, noting, “We are concerned about the potential overseas outflow of invaluable national assets, such as South Korea’s container transportation assets, terminals, and decades of accumulated maritime logistics expertise, if HMM were sold to Hapag-Lloyd.”
The KSJA went further to demand the cessation of the sale. It has expressed concerns that if an FI partnering with domestic companies were to acquire HMM, it could potentially harm the competitiveness of these businesses. It stated, “We are concerned that it may lead to the ‘winner’s curse’ if cash-strapped companies push forward with an acquisition in collaboration with FIs,” and emphasized, “Instead of rushing to sell, the KDB and the KOBC should take their time to find the right owner for HMM even it takes time in order to grow the nation’s only domestic-flagged ocean carrier and enhance South Korea’s trade capacity.”
In last month’s sale announcement, the KDB said, “The sale-related procedures may be canceled or modified depending on the seller’s circumstances.” This leaves room for delaying the sale if there are no eligible candidates.
However, the KDB maintains its position of achieving the sale within this year. A KDB official stated, “As we have decided to select eligible acquirer candidates within this month, we will conclude the selection process by the end of this week,” and added, “There are no changes to the plan to sell HMM within this year.”