Korea continues to explore privatization of HMM
As part of a plan to privatize some of South Korea’s major industrial companies to improve their competitiveness, Korea Development Bank officials have confirmed they are in talks to explore a sale of their stake in the giant. maritime HMM. Speculation on a deal began in January 2021 and its timing could be linked to HMM’s sharp rise in valuation as the container shipping industry has recovered over the past year.
The Korea Times quotes the bank’s chairman, Lee Dong-gull, as saying that the bank is considering acquiring the bank’s investment in the shipping company with a Korean conglomerate. KDB would be the biggest investor in HMM as a bond holder. According to the outlet, KDB would structure the deal in several stages, including a conversion of the bonds into shares of the company, which would give the bank a 25 percent stake in HMM.
KDB said it is currently undertaking an in-depth review with Korean government officials as they explore a possible sale of the shipping company. In January, Korean media reported that the steel company POSCO was the potential buyer of the shipping company and that the bank was beginning to consider a comprehensive restructuring plan for HMM. Bank officials, however, have denied that a specific company has contacted them at this point about a possible acquisition of its stake in HMM.
Launched in the late 1970s, the 45-year-old shipping company started out as a regional operator of tramp steamers. As they grew, the company was christened Hyundai Merchant Marine in 1982 and last year shortened its name to HMM. Today they are ranked eighth container company by Alphaliner on the basis of TEU capacity.
The company says it has a total capacity of over 700,000 TEUs, including a dozen of the world’s largest container ships, each with a capacity of just under 24,000 TEU. HMM is also taking delivery of an additional 16,000 TEU containers under construction at Hyundai Heavy Industries. The company is targeting 850,000 TEU capacity this year as it strives to rebuild container capacity to 1 million TEU. HMM also continues to operate smaller fleets of tankers and bulk carriers of products and crude oil. The fleet currently consists of nearly 100 vessels, including nearly 70 container ships.
Hyundai posted the highest quarterly operating profit in company history in the first quarter of 2021. Revenue nearly doubled to over $ 2 billion and operating profit increased from a slight loss a year ago to over $ 900 million in the first quarter of 2021. The company’s stock price has increased tenfold to give HMM a current market cap 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 behind the proposed acquisition of Daewoo Shipbuilding & Marine Engineering (DSME) by Hyundai Heavy Industries. Announced in 2019, the deal remains on hold pending regulatory review from the EU, Korea and Japan.