South Korea’s SM buys shipping firm HMM shares ahead of bid

Container ship of Hyundai Merchant Marine, Korea's No. 1 shipping line (Photo courtesy of Hyundai Merchant Marine))
Container ship of South Korea’s leading shipping company HMM (courtesy of HMM))

South Korea’s SM Group has increased its stake in Hyundai Merchant Marine, the country’s No. 1 container carrier. South Korea’s 30th-largest conglomerate, which aims to buy a controlling stake in HMM, has acquired more shares to boost the enterprise value of its biggest domestic rival, market watchers say.

SM Group’s Dongbu E&C bought about 500,000 shares of HMM last month, raising the group’s holding to 6.66% from 6.56%, according to banking sources on Wednesday. The shares purchased in July are worth about 8.9 billion won ($6.9 million) as of the Aug. 2 closing price.

SM Group officials said they could not confirm which of its affiliates had purchased additional HMM stakes.

SM Group, the parent company of SM Shipping, is HMM’s third-largest shareholder after the Korea Development Bank (KDB) and ship financier Korea Offshore Banking Corporation (KOBC). The two sovereigns hold a combined 40.65 percent stake.

“As soon as the sale of[SM Group] is officially announced, we will jump into the battle to acquire HMM,” SM Group Chairman Woo Oh-hyun said in an interview with The Korea Economic Daily in July. At the time, SM Group said it believed the right price for HMM was around 4 trillion won and could offer up to 4.5 trillion won.

In March, the Industrial Bank of Korea and the Export-Import Bank of Korea began the process of privatizing HMM through a stake sale to recover taxpayer money poured into the country’s largest shipping company.
Hyundai Merchant Marine (formerly Hyundai Shipping) was acquired by the Development Bank of Korea in 2016 after receiving 6.8 trillion won in support from the state-run bank to cover losses that snowballed during the shipping industry recession.

Industry insiders said SM Group bought more shares last month as Wu sought to boost HMM’s valuation.

Earlier this month, Industrial Bank of Korea announced that it would convert 1 trillion won worth of HMM convertible bonds (CB) and warrants (BW) into 200 million shares. and plans to sell them along with a controlling stake.

SM Group needs to increase the value of HMM as the state-owned bank has indicated that the selling side is willing to negotiate on the details of the bond conversion, industry sources said.

While general merchandise conglomerate LX Group, fisheries conglomerate Dongwon Group, and agri-food company Harim Group are among the potential buyers, the KDB appears to have identified SM Group as the strongest candidate for HMM, the official added.

Market experts said SM Group is likely to buy more HMM shares if the shipping line’s share price falls.

Write to Jaepu Kim
This article has been edited by Kim Jihyun.


Leave a Reply

Scroll to Top