HMM is up for sale and it seems that Hapag-Lloyd want to buy it. But do the Koreans want to sell it to them? Ti’s chief analyst Thomas Cullen reports.
HMM, formerly known as Hyundai Merchant Marine, is largely owned by the state-owned Korean Development Bank after its was rescued from bankruptcy in 2016. The Korean Development Bank (KDB) and the related ‘Korea Ocean Business Corporation’ hold approximately 40% of the equity along with substantial bond holdings. They are now looking to sell these holdings. Rather than floating these shares on the stock market they are looking to place the holdings directly with investors, utilising a bidding process.
Although there have been bidders for the stock, reports in the South Korean media suggest that key South Korean companies Hyundai Motor Group and POSCO appear to have indicated disinterest in the sale. Those Korean companies that are reported to have expressed an interest are struggling to find the six trillion Won (US$4.5bn) that the KDB wants for the stock. One company that does have the money is Hapag-Lloyd. HMM is attractive to the Hamburg based shipping line due to HMM’s fleet and strength in Asia. It would enable Hapag-Lloyd to sustain its market share in the face of fierce competitors who are expanding their fleets. Hapag- Lloyd has not publicly confirmed its interest but it is widely reported in South Korea media to be the most credible party in the offer process.
The problem is, the South Korean electorate, politicians and business establishment are uncomfortable about selling HMM to non-Koreans. Phrases such as “leakage of Korea’s priceless national assets,” are used when critiscising the prospect of a sale to Hapag-Lloyd. However, existing shareholders in HMM point-out that no other prospective investors have the capital available to sustain HMM in the capital hungry shipping sector.
All of this goes to the heart of a debate in South Korea over the role of the Korean Development Bank in sustaining industries that struggle to offer a return on investment. The bail-out of HMM came after the collapse of Hanjin Shipping, which triggered a controversy over the fate of South Korea’s maritime sector and the jobs associated with it.
It is possible that the inability to resolve this issue with lead to the delay of sale of the KDB stake.
Author: Thomas Cullen
Source: Ti Insights
Supply chain strategists can use GSCi – Ti’s online data platform – to identify opportunities for growth, support strategic decisions, help them stay abreast of industry trends and development, as well as understand future impacts on the industry.
Visit GSCI subscription to sign up today or contact Michael Clover for a free demonstration: [email protected] | +44 (0) 1666 519907
