Foundered on ‘Monitoring Reef’
Sale of majority stake in HMM fails, due to conditions for future management. Takeovers tend to fail on account of the price. In the case of the South Korean shipping line HMM, however, the bidder Harim objected to restrictions of its future entrepreneurial freedom. Was it wise, then, to exclude international bidders such as Hapag-Lloyd in 2023?
The bidding process for South Korea’s most important global container shipping line, HMM, was closed without conclusion at the beginning of February. After Hanjin Shipping’s bankruptcy in 2017 the majority stake in HMM was taken over by the state-owned Korea Development Bank (KDB) and the Korea Ocean Business Corporation (KOB), which now wanted to sell 57.9% of their 75% stake in HMM.
There are smaller holdings in HMM too, including SM Line, which acquired further HMM shares and thus increased its stake to 6.66% in summer 2023.
Of the original six bidders – Hapag-Lloyd, the SM Group (SM Line), LX Holdings, the Dongwon Group, Global Sae-A and Harim – only the latter (together with partner companies) was left in the end. Now Harim, a major South Korean food and agriculture conglomerate, a shareholder in Pan Ocean and the last national bidder, has now also dropped out of contention.
It’s not about money – it’s about control
In December 2023 the consortium of Harim and JKL Partners from Seoul was selected as the preferred bidder. Their bid – KRW 6.4 trillion (USD 5 billion) – was KRW 200 billion (USD 150 million) higher than that of the second national bidder, the Dongwon Group.
The main problem for Harim turned out to be KDB and KOB’s desire, as the main creditors, to have a say in the future management of the carrier. They wanted to remain closely involved in HMM operations. The protracted negotiations led the two state-owned institutes and the Harim consortium to extend the original deadline for this round of the negotiations to 6 February 2024.
The Harim consortium then chose not to comment anymore before the deadline passed – thus abandoning its interest in a takeover.