South Korea’s Harim Group has pulled out of a deal to acquire a majority stake in the country’s largest container carrier, Hyundai Merchant Marine (HMM), citing failure to reach agreement on terms by the February 6 deadline.
The consortium led by Harim, in partnership with private equity firm JKL Partners, was selected as the preferred bidder at the end of 2023. However, negotiations hit a roadblock over the government’s insistence on a strict five-year lock-up period.
Harim expressed its concerns, stating, “No company will likely accept a deal where the buyer is given the largest shareholder position without the guarantee of exercising actual management rights.”
Despite several concessions made by Harim during the seven weeks of negotiations, including withdrawal of earlier demands, the impasse persisted, particularly regarding restrictions on dividends, share sales, and board appointments.
The consortium reportedly sought waivers for JKL Partners, a financial investor requiring early recovery of funds, but the government, represented by Korea Ocean Business Corp (KOBC) and the Ministry of Oceans and Fisheries, stood firm on retaining control.
Harim and JKL Partners had offered KRW 6.4 trillion (USD 4.9 billion) for the 57.9% stake in HMM, surpassing the bid from seafood group Dongwon Group by KRW 200 billion. Dongwon Group, the other shortlisted bidder, expressed uncertainty over a renewed bid for HMM following Harim’s withdrawal.
The majority stakeholders, government-backed Korea Development Bank (KDB) and KOBC, now hold onto the 57.9% stake in HMM along with bonds valued at approximately KRW 1.7 trillion.
The privatization process has faced criticism for attracting bidders with relatively limited resources compared to HMM’s magnitude, further complicated by anticipated rate declines post the resolution of the Middle East crisis and the fallout from Hapag-Lloyd’s departure from THE Alliance, leaving HMM, ONE, and Yang Ming as the remaining members.
The government is expected to exercise call options on the bonds and convert them into equity before the next year’s deadline to avoid negligence claims. This conversion would have reduced Harim’s stake from 57.9% to 38.9% had it occurred during the latest sale process.
