South Korea’s two ocean-going carriers could merge as the Samra Midas group wants to bid to acquire HMM.
SM group, the parent of SM Line, plans to submit a bid of not more than KRW4.5 trillion (US$3.5 billion) for HMM, South Korea’s flagship carrier, said group chairman Woo Oh-hyun during an interview with Korea Economic Daily on 19 July.
SM group has become a rescuer of South Korea’s shipping industry, having taken dry bulk shipping businesses Korea Line Corporation, Korea Shipping Corporation (formerly Samsun Logix) and Chang Myung Shipping out of court protection, and under its umbrella.
SM Line was itself formed in 2016, after SM Group acquired the remaining business of bankrupt Hanjin Shipping. The same year, the state assumed control of HMM, after main creditor Korea Development Bank (KDB) swapped debt for equity.
Woo said, “I’m 72 years old, and I’d like to complete the national shipping industry for the last time. We can raise funds of up to KRW4.5 trillion through the cash holdings of each affiliate and bank loans. I’ve received several requests from inside and outside the SM group to acquire HMM.”
Woo believes that KRW4.5 trillion is enough to purchase the combined stake of 40.65% held by state-backed policy lender KDB and ship finance institution Korea Ocean Business Corporation (KOBC). The total state interest is 52%, including shares held by the National Pension Service and Korea Credit Guarantee Fund.
KDB chairman Kang Seok-hoon, like his predecessor Lee Dong-gull, has opined that HMM’s operations have normalised and it is time for the company to come off state support. Media reports claim that Kang could announce a development in KDB’s discussions with potential buyers at month’s end.
SM Line and its affiliates are now HMM’s third-largest shareholder behind KDB and KOBC, after buying shares since 2021. The group had, however, kept denying any interest in taking over HMM, insisting that the share purchases were investments.
Convertible bonds held by KDB and the other state-backed organisations could bring the state interest to 74%, meaning that around US$8 billion could be needed to purchase the state’s shares. This is said to be an obstacle to potential buyers, and Woo acknowledged this.
Woo said, “There’s talk of converting HMM’s convertible bonds held by KDB into stocks, if this happens, we won’t participate in the bidding.”
Today, South Korean media, citing sources in the investment banking industry, reported that less than half of the aforementioned bonds would be exchanged for shares, in order to reduce the selling price of the state’s HMM shares.
Martina Li
Asia Correspondent
