Korea's HMM bidders shortlisted to LX Group, Harim, Dongwon

Bidders for HMM Co., South Korea’s top shipping company, have been shortlisted to LX Group, Harim Co. and Dongwon Industries Co., according to people with knowledge of the matter on Tuesday. German shipping giant Hapag-Lloyd AG didn’t pass the qualification screening process for the bid, of which the sale price is expected to surpass 5 trillion won ($3.8 billion), sources said.

State-run Korea Development Bank (KDB) and Korea Ocean Business Co. (KOBC) selected the three bidders on Aug. 21 after screening bidding documents and said they would notify them of the result as early as Aug. 30, sources added.

HMM’s smaller rival SM Group, which has expressed its interest in the deal, didn’t participate in the bidding process. 

The stake up for the deal is 40.65% of HMM. But it could swell to 58% if creditors KDB and KOBC convert their 1 trillion won worth of permanent HMM bonds into shares.

OVERSEAS BUYER

KDB and KOBC are said to have valued qualitative standards during the screening process, such as how much a buyer can contribute to Korea’s shipping and container transportation industry through the deal. The German shipping giant didn’t meet the standards, according to sources.

“Hapag-Lloyd aimed to secure HMM’s management information through due diligence and, with its ample liquidity, would lead to bidders’ overpayment. The creditors have filtered out the German company through fair procedures,” an investment banking source said.

The Federation of Korea Maritime Industries (FKMI) has announced that it opposes a foreign company’s takeover of HMM, in consideration of the Korean economy and its national security.

Korea’s competitiveness in shipping and logistics will wane if Hapag-Lloyd buys HMM, and it will lead to serious issues in terms of national security, the group of private marine transport firms said.

FINANCING STRATEGIES

Harim, a leading meat processor, has formed a consortium with local private equity manager JKL Partners and secured the country’s major banks Woori and Kookmin as lenders to provide acquisition financing. The company is considering additional funding by securitizing real estate, a warehouse development site in southern Seoul.  

Dongwon, Korea’s top canned tuna producer, plans to fund the acquisition with its equity capital. It is considering selling stakes in some major affiliates in a block deal or securitizing assets for the deal financing, without participation of a financial investor.

LX Group, a logistics-to-trading conglomerate, has tapped accounting firm Samjong KPMG as its financial advisor and is preparing for the bid.

All three bidders stated they would buy HMM for more than 5 trillion won, according to sources. The final purchase price may change as the prices they suggested during the qualification screening process are non-binding.

Write to Jun-Ho Cha and Jong-Kwan Park at chacha@hankyung.com


Jihyun Kim edited this article.