- The Harim Group-JKL Partners consortium failed to solve its differences with the carrier’s major shareholders, Korea Development Bank and Korea Ocean Business Corp.
- Harim-JKL wants a three-year moratorium on the bond conversion so it can get more dividends from HMM.
Agreement Elusive Despite Consortium Selection
After the Harim-JKL consortium was selected as the preferred bidder for the 57.9% stake in HMM held by KDB and KOBC in December, both sides were supposed to have agreed the sale details by 23 January.
Sticking Points: Convertible Bonds and Share Selling Restrictions
The consortium comprising Harim Group, a poultry processor that took over dry bulk outfit Pan Ocean in 2015, and JKL, a private equity investment firm, offered around $4.9bn for the shares. A sticking point seems to be the KRW1.68trn ($1.26bn) convertible bonds held by KDB and KOBC.
If the bonds are exchanged by 2025, Harim-JKL’s stake could be diluted to 38.9%, and the state-controlled organisations’ holding increased to 32.8%, leaving just a gap of just 6.1 percentage points between them.
Harim-JKL wants a three-year moratorium on the bond conversion so it can get more dividends from HMM.
Meanwhile, KDB and KOBC are insisting Harim-JKL refrain from selling any purchased HMM shares for five years. JKL, however, wants to be exempted from this restriction, allowing it cash out of its investment within five years.
KDB and KOBC are reportedly not keen on making this exception.
Uncertainties and Industry Challenges
With the sale delay, attention has also been drawn to the challenges currently facing the shipping industry. The Red Sea crisis is escalating, with Houthis continuing to attack ships. Liner operators have been compelled to divert from the Suez Canal round the Cape of Good Hope. A new owner of HMM will need to be able to make the right decisions concerning vessel deployment.
Hapag-Lloyd’s imminent departure from THE Alliance, which comprises HMM, Yang Ming Marine Transport and ONE, also throws shade on HMM’s own competitiveness. There is also, then, a need to prepare for a newly organised alliance.
HMM’s employee unions are also doubtful of Harim’s ability to take over the company, due to the imbalance in cash holdings, a situation described in local media as “a shrimp swallowing a whale”.
Meanwhile, the union representing the carrier’s seafarers is demanding an increment and extended retirement age, threatened to strike and has applied for mediation with the Central Labour Relations Commission.
