Korea Continues to Explore Privatization of HMM
As part of a plan to privatize some of South Korea’s large industrial companies to enhance their competitiveness, officials of the Korea Development Bank confirmed they are in discussions exploring a sale of their stake in shipping giant HMM. Speculation over a deal began in January 2021 and its timing could be tied to the strong rise in HMM’s valuation as the container shipping industry recovered in the past year.
The Korea Times is quoting the chairman of the bank, Lee Dong-gull, as saying the bank was exploring the acquisition of the bank’s investment in the shipping company with a Korean conglomerate. KDB is reported to be the largest investor in HMM as a bondholder. According to the news outlet, KDB would structure the deal in several stages, including a conversion of the bonds into equity in the company, which would reportedly give the bank a 25 percent stake in HMM.
KDB reported that it is currently undertaking a comprehensive review with officials of the Korean government as they explore a possible sale of the shipping company. In January, the Korean media reported that steel company POSCO was the possible buyer of the shipping company and that the bank was beginning the review of a comprehensive restructuring plan for HMM. Bank officials, however, denied that any specific company has approached them at this point about a possible acquisition of its stake in HMM.
Launched in the late 1970s, the 45-year-old shipping company was started as a regional operator of tramp steamers. As they expanded, the company was branded Hyundai Merchant Marine in 1982 and last year shortened its name to HMM. Today they are ranked the eighth-largest container company by Alphaliner based on TEU capacity.
The company reports it has a total capacity of over 700,000 TEU including a dozen of the largest container ships in the world, each with a capacity of just under 24,000 TEU. HMM is also taking delivery on additional 16,000 TEU boxships being built at Hyundai Heavy Industries. The company is targeting 850,000 TEU capacity this year as it works to rebuild container capacity to 1 million TEU. HMM also continues to operate smaller fleets of product and crude oil tankers and bulkers. The fleet currently consists of nearly 100 vessels, nearly 70 of which are containerships.
Hyundai recorded the highest quarterly operating income in the history of the company during the first quarter of 2021. Revenues nearly doubled to over $2 billion and operating income rose from a small loss a year ago to over $900 million in the first quarter of 2021. The company’s stock price rose 10 fold to give HMM a current market capitalization of over $13 billion.
If the bank proceeds with the privatization of HMM, it would be their second major effort to strengthen the maritime industries through mergers. KDB was the driving force between the proposed acquisition of Daewoo Shipbuilding & Marine Engineering (DSME) by Hyundai Heavy Industries. Announced in 2019, that deal remains bogged down waiting for regulatory review from the EU, Korea, and Japan.