South Korea’s flagship container carrier HMM is understood to have submitted a KRW300 billion (US$233 million) bid for Hyundai LNG Shipping early in June 2023, as the group is reportedly reducing its dependence on box shipping.
Hyundai LNG Shipping, which owns 16 LNG carriers and six very large gas carriers, was originally part of HMM, but was divested back in 2014 when the latter began facing financial troubles.
The LNG shipping unit was sold to South Korean private equity firms IMM Private Equity and IMM Investment for US$375 million and renamed Hyundai LNG Shipping. In mid-2016, HMM came under the control of state policy lender Korea Development Bank after a debt-for-equity swap.
Amid the current LNG shipping boom, IMM now wants to cash out of its investment.
On the other hand, HMM’s CEO Kim Kyung-bae said in mid-July that US$11.5 billion has been set aside to expand its business, including acquiring container terminals and building more container ships and bulk carriers.
South Korean market observers noted that if HMM acquires Hyundai LNG Shipping, it can reduce its dependence on the container ship business by carrying LNG.
Buying back its former subsidiary will also enable HMM to sidestep a non-compete clause the company had signed when it divested Hyundai LNG Shipping—the clause states that HMM is not to start an LNG shipping operation until after 2029.
As of March, HMM’s fleet stands at 72 container ships, 15 oil and products tankers, 13 bulk carriers, and four multi-purpose ships.
HMM’s efforts to diversify its business have continued even before the bid for Hyundai LNG Shipping. In April, the company signed a 10-year consecutive voyage charter contract with compatriot oil refiner GS Caltex to ship crude oil.
HMM also ventured into ship leasing when it ordered three pure car and truck carriers at Guangzhou Shipyard International. Upon delivery in 2025, the PCTCs will be chartered to Hyundai Motor’s shipping unit Hyundai Glovis for 16 years.
While HMM is offering less than what it had sold Hyundai LNG Shipping for, observers said the price is fair, considering the latter’s poor earnings, with consecutive operating losses going back to at least 2018. Only high investment income has kept Hyundai LNG Shipping in overall profitability.
Martina Li
Asia Correspondent
