The emergence of Hapag-Lloyd as a contender for the acquisition of South Korean carrier HMM is not a surprise, given that the company is up for sale and other major lines have made large profits over the past two years.
Local media reports say that Hapag-Lloyd requested an Information Memorandum from Samsung Securities and is considering entering the race for HMM with its advisors Goldman Sachs.
The state-owned finance institutions Korea Development Bank (KDB) and Korea Ocean Business Corp (KOBC) hold combined a 40.65% of shares valued at US$746 million as well as US$2 billionn in convertible bonds, which are included in the sale. In total the estimated sale price is set at around US$3.74 billion.
It is known that at least five local players have registered an interest and Hapag-Lloyd has now reportedly added its name to the list of suitors, which includes LX Group, Samra Midas Group, Harim Group, Dongwon Group and Global Sae-A, that have received a prospectus from Samsung Securities, which is handling the HMM sale.
Hapag-Lloyd has not denied the reports and as the date to submit bids is today unless the German carrier has made a bid already, it will not make the shortlist due to be announced by KDB and KOBC by November.
A senior banking source told Container News, “HMM is for sale so why wouldn’t they look at it, I’m sure that every large carrier has had a look,” he went on to say, “Everyone is reasonably flush with cash so it can make sense to buy a carrier rather than just more ships.”
In what would seem a reasonable business case to make Hapag-Lloyd, a member of THE Alliance along with HMM, will already share operations with the South Korean line. However, the German carrier is looking to boost its Asia to Europe and Transpacific coverage and, with the acquisition of HMM, would make significant inroads into key intra-Asian markets.
Expansion of Hapag-Lloyd through the acquisition of HMM would likely push the carrier into the top three or four carriers, by fleet size. Hapag-Lloyd operates a fleet of 258 vessels, with a total fleet capacity of 1.9 million TEUs. Hapag-Lloyd has an orderbook consisting of 362,616 TEUs according to S&P Global figures in March this year.
HMM has a fleet of 83 ships totalling 828,000 TEUs, less than half the fleet size of its suitor, with a further 265,000 on order according to S&P Global figures.
Of the other bidders showing interest in HMM there is SM Group, which acquired Hanjin following its bankruptcy, and would need to take on considerable debt to acquire the government-owned banks’ share in the carrier.
Other potential bidders include Dongwon, whose core business is deepsea fishing and processing, and who is also involved in 3PL services, operating a container terminal in Busan. Dongwon Industries is working with Korea Investment Holdings, a financial services group, while Global Sae-A is a large apparel manufacturer and exporter looking for vertical integration through the HMM acquisition.
Mary Ann Evans
Correspondent at Large
