SM Group reverses HMM takeover dream

SM Group reverses HMM takeover dream

August 28, 2023

Samra Midas Group, parent of HMM’s compatriot peer SM Line, has U-turned on its plan to acquire the state’s interest in South Korea’s flagship container carrier.

It is understood that SM Group did not submit a bid for HMM when entries closed on 21 August, even though its founding chairman Woo Oh-hyun was the first to make known his intention to acquire the company.

HMM came under state control in 2016, after exchanging its debt to policy lender Korea Development Bank, for equity. As HMM achieved record profits amid the Covid-19-fuelled boom, the state decided it was appropriate to release the company from taxpayers’ support.

SM Line did not respond to Container News’ request for comment.

KDB and state-controlled ship finance institution Korea Ocean Business Corporation plan to sell a 57.87% stake in HMM.

Woo had previously stated in interviews with South Korean media that he would not pay more than US$3.5 billion to acquire HMM. However, the 57.87% stake in HMM is estimated to cost between US$3.8 billion and US$7.6 billion, suggesting that SM Group backed out due to funding concerns. This was despite SM Group’s continuous purchase of HMM’s shares that gave it a 6.66% stake as of 3 August, making it the company’s third-largest shareholder behind KDB and KOBC.

The SM Group had built up a reputation as a white knight for South Korea’s shipping industry, having taken over distressed dry bulk shipping businesses, such as Korea Line Corporation, Korea Shipping Corporation and Chang Myung Shipping. SM Line was itself created from acquiring the operations of Hanjin Shipping, which ceased operations in 2016 and went bankrupt in 2017.

Linerlytica analyst Tan Hua Joo told Container News that like HMM’s former LNG shipping affiliate Hyundai LNG Shipping, the sale attempt could fall through if a buyer cannot be found.

He said: “The SM bid has always been dependent on getting in at a cheap entry price.”

German mainline operator Hapag-Lloyd, Pan Ocean’s parent Harim Group, South Korean logistics group LX Pantos and fishing-and-logistics group Dongwon have submitted bids. Harim has formed a consortium with private equity player JKL Partners, which also helped bankroll its takeover of Pan Ocean in 2015.

Global Sae-A, South Korea’s largest apparel exporter, had reportedly requested a prospectus for the HMM bid from Samsung Securities, which is handling the sale. However, Global Sae-A too, chose not to enter the bidding process.

A preferred buyer could be named in September, and more discussions will be held before the HMM sale is finalised.

Martina Li
Asia Correspondent

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