- HMM was chosen as the preferred bidder for SK Shipping’s management rights by Hahn & Co.
- The valuation dispute remains a challenge, with Hahn & Co. targeting 4 trillion won while HMM values it at around 2 trillion won.
- HMM’s prior non-compete clause on LNG operations could complicate the deal structure.
In a major development for South Korea’s shipping sector, Hahn & Co. has named HMM as the preferred bidder for the sale of SK Shipping’s management rights. This decision, reported by the investment banking industry on February 20, marks a significant step in reshaping the domestic shipping landscape. Morgan Stanley is overseeing the sale process, with HMM conducting due diligence until mid-March before finalizing its acquisition, reports Business Korea.
HMM Selected as Preferred Bidder for SK Shipping Sale
Hahn & Co., a private equity firm, acquired SK Shipping in 2018 for 1.5 trillion won and currently holds a 71.43% stake through Hahn & Co. Tanker Holdings Limited. SK Corp. is another key shareholder, holding 16.35%.
The sale involves SK Shipping’s crude oil, liquefied petroleum gas (LPG), and liquefied natural gas (LNG) operations, making it a crucial deal in the industry.
Valuation Discrepancy Remains a Sticking Point
A key challenge in negotiations is the valuation of SK Shipping.
- Hahn & Co. aims for a 4 trillion won valuation, considering the company’s tanker, LPG, and LNG operations.
- HMM, however, estimates a lower valuation of around 2 trillion won, citing market conditions.
The financial performance of SK Shipping in 2023, with sales of 1.8865 trillion won and an operating profit of 367.1 billion won, plays a role in the valuation debate. Meanwhile, HMM’s strong financial standing is evident in its 2024 sales of 11.7002 trillion won and operating profit of 3.5128 trillion won, reinforcing its capability for mergers and acquisitions.
Potential Complications: LNG Non-Compete Clause
One hurdle in the acquisition is HMM’s prior sale of its LNG division to IMM Private Equity, which included a non-compete clause. This clause could prevent HMM from acquiring SK Shipping’s LNG assets, forcing the deal structure to be modified.
If HMM only purchases SK Shipping’s tankers and LPG division, Hahn & Co. might face difficulties finding a separate buyer for LNG operations later.
Next Steps: Final Negotiations and SPA Signing
After HMM completes due diligence, both parties will move to final negotiations regarding:
- Acquisition method
- Final price agreement
The goal is to sign a Stock Purchase Agreement (SPA), officially finalizing the sale. However, the valuation gap and LNG non-compete issue remain critical factors that could influence the final structure of the deal.
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Source: Business Korea
