Not a penny for Samsung Sec in failed HMM deal, and little sympathy

After the planned $5 billion sale of HMM Co., South Korea’s largest container shipper, to poultry processor Harim Co. fell through this week, the realization is dawning on Samsung Securities Co. that it must pack up and leave empty-handed.

Samsung worked for HMM’s sell-side – Korea Development Bank (KDB) and Korea Ocean Business Corp. (KOB) – for about a year. On the condition of completing the sale, it was promised up to 51.8 billion won ($40 million) in fees, according to sources familiar with the matter.

But the two state-run bodies attached another condition for the HMM sale manager – that the latter must not raise any issue about receiving nothing if the sale fell through.

In March last year, Samsung won the mandate for the deal, beating global banks such as Morgan Stanley and JPMorgan, as well as local rivals such as KB Securities Co. and NH Investment & Securities Co.

Considering Samsung’s dedication to the flopped HMM deal, it would be frustrating not to be compensated for it.

To drum up interest in HMM, the brokerage house assured final bidders they could amend their original offers during negotiations with KDB and KOB, according to banking sources.

However, KDB stood firm against Harim’s proposed modifications and finally failed to narrow its differences with the preferred buyer of HMM.

Some industry sources said Harim’s modified offer also triggered disputes between Samsung Securities and KDB and was another factor in the deal's collapse.

REPUTATION RISK

Worse yet, Samsung Securities may have to deal with a risk to its reputation given the sale not going through. Last year, it acted for HYBE Co., the company behind the boy band BTS, to secure a controlling stake in SM Entertainment Co. in a tender offer. However, the attempt failed due to counteraction by mobile giant Kakao Corp.

The sources said Samsung revealed its lack of capabilities in terms of facilitating communication and coordination between the potential buyers, the seller and HMM. As an example, a preliminary bidder made an official complaint to Samsung that HMM did not cooperate with the due diligence process.

“The HMM deal was highly complicated, but Samsung Securities revealed its shortcomings in many aspects,” said another investment banking official.

“Samsung Securities failed to meet our expectations during the sale process. We felt the significant difference in its capabilities, compared to global IBs,” a source with direct knowledge of the situation told Market Insight, the capital market news outlet of The Korea Economic Daily.

Samsung Securities was not immediately reached for comment.

Write to Jong-Kwan Park at pjk@hankyung.com
 

Yeonhee Kim edited this article.