SM Group Abandons HMM Acquisition Ambitions

Parent company SM Group unexpectedly abandons its bid to acquire South Korean flagship container carrier HMM, despite prior interest and stake acquisition.

HMM vessel

A container vessel of HMM (Photo: HMM)

In an unexpected turn of events, Samra Midas Group, the parent company of HMM's compatriot peer SM Line, has reversed its course on the plan to acquire the South Korean state's stake in the nation's prominent container carrier.

Despite the initial intentions voiced by the group's founding chairman, Woo Oh-hyun, to acquire the company, it appears that SM Group did not submit a bid for HMM as the bidding window closed on August 21st.

HMM had transitioned under state ownership in 2016 by converting its debt owed to policy lender Korea Development Bank into equity. With record profits realized during the Covid-19-fueled boom, the state opted to release the company from taxpayer support.

While Container News sought a response from SM Line, no comment was provided.

Korea Development Bank (KDB) and the state-controlled ship finance institution Korea Ocean Business Corporation had planned to divest a 57.87% stake in HMM.

Woo had previously stated to South Korean media that his maximum payment for acquiring HMM would not exceed $3.5 billion. However, the estimated cost for the 57.87% stake ranged between $3.8 billion and $7.6 billion, potentially prompting SM Group to withdraw due to funding concerns. This move followed SM Group's gradual accumulation of HMM's shares, securing a 6.66% stake by August 3rd, positioning it as the third-largest shareholder behind KDB and KOBC.

SM Group had gained recognition as a savior for South Korea's shipping industry through its rescue of struggling dry bulk shipping enterprises like Korea Line Corporation, Korea Shipping Corporation, and Chang Myung Shipping. SM Line itself emerged from the acquisition of Hanjin Shipping's operations after its cessation in 2016 and subsequent bankruptcy in 2017.

According to Linerlytica analyst Tan Hua Joo, similar to HMM's former LNG shipping affiliate Hyundai LNG Shipping, the sale attempt could falter if a suitable buyer isn't identified.

Joo commented, "The SM bid has always been dependent on getting in at a cheap entry price."

Among the bidders, Germany's major liner operator Hapag-Lloyd, Harim Group (parent of Pan Ocean), South Korean logistics entity LX Pantos, and fishing-and-logistics group Dongwon have submitted their offers. Harim has formed a consortium with private equity player JKL Partners, which had also backed its Pan Ocean takeover in 2015.

Global Sae-A, South Korea's most prominent apparel exporter, reportedly obtained a prospectus for the HMM bid from Samsung Securities, the sale's handler. However, Global Sae-A also opted not to proceed with the bidding process.

The selection of a preferred buyer is anticipated in September, followed by further deliberations before finalizing the sale of HMM.

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