Harim Group, selected as the preferred bidder for the acquisition of HMM, announced in its official statement on Dec. 26 that it intends to utilize HMM’s cash reserves, or retained earnings, to enhance global competitiveness.
In the statement, Harim Group emphasized, “The cash assets held by HMM should be used to respond to the ongoing shipping business downturn and for future competitiveness, given the group’s firm belief. Global shipping companies such as MSC and Maersk maintain substantial cash reserves to prepare for shipping downturns.”
Furthermore, Harim stated, “In a situation where a downturn is anticipated, it is desirable to minimize dividends to enhance HMM’s competitiveness. There is the precedent of not paying dividends for five years after a merger and acquisition (M&A) to enhance competitiveness as seen in the case of the past acquisition of Pan Ocean.”
On Dec. 22, the HMM union asserted that in the event of Harim Group’s acquisition, measures should be taken to prevent the possibility of Harim utilizing HMM’s significant retained earnings amounting to 10 trillion won (US$7.71 billion) as dividend resources.
Harim also strongly denied any possibility of a merger between the bulk carrier Pan Ocean, which it acquired in 2015, and HMM. The company stated, “There will be no merger of Pan Ocean and HMM or any artificial adjustment of business structures,” adding, “Many companies that have become subsidiaries of the group are maintaining their previous company names, brands, and products.”
Concerns about the financial capability of Harim Group have been raised since the time it expressed interest in participating in the HMM acquisition, estimated at 6.4 trillion won. Even if the group secures funds through acquisition partners like JKL Partners and acquisition financing, Harim itself needs to secure around 2.4 trillion won. According to public disclosures as of September, however, Harim Holdings’ cash and cash equivalents amounted to only 66.2 billion won.
Amid this, reports indicate minimal progress in the negotiations regarding the “shareholder conditions” within the main contract between Harim Group, chosen as the preferred bidder for HMM’s acquisition, and the selling side, which includes Korea Development Bank and Korea Ocean Business Corporation. With only four weeks remaining until the deadline for negotiating these conditions, the intense tug-of-war between the two sides raises speculation about whether the contract will be concluded as planned.