Hapag-Lloyd Contemplates Bidding for HMM

Number-five ocean carrier Hapag-Lloyd may throw its hat into the ring for the acquisition of a controlling stake in South Korean rival HMM, according to reports in Korean and German media.

HMM is South Korea's only remaining global container carrier. The majority stake up for sale this month is held by state policy bank KDB and by Korea Ocean Business Corporation, a government-chartered maritime finance company. They came to control HMM through a government bailout plan that began during the 2016 downturn, after the sudden collapse of Hanjin Shipping. Between them, KDB and KOBC would own the equivalent of about 75 percent of HMM if all of their convertible bonds were transformed into stock, and they are selling about 58 percent. 

Hapag-Lloyd has confirmed that it is evaluating opportunities for acquisitions, but it faces competition. There are five reported bidders to date, all Korean: SM Group, owner of the smaller carrier SM Line; Harim, the largest investor in bulker firm Pan Ocean; logistics businesses LX Holdings and Dongwon Group; and a consumer-goods exporter, Global Sae-A. 

An acquisition by a foreign buyer would be a remarkable (and politically difficult) development for Korean shipping. One of the government's objectives in sustaining this national champion is to ensure availability of transport for Korean private enterprises. During the late-pandemic cargo surge, HMM and the Korean Ministry of SMEs reached a deal to set aside space for smaller Korean businesses, ensuring their continued access to container slots in a red-hot freight market. At about the same time, HMM also partnered with government postal service Korea Post to set up a door-to-door export service for small and medium Korean businesses. 

The chairman of SM Group has pledged to buy and grow HMM for the benefit of South Korea, so long as the price does not exceed $3.5 billion. “Considering my age of 72, I have decided to buy HMM as my last mission — to reinvigorate our nation’s shipping industry by making us Asia’s No.1 shipping company," SM Group Chairman Woo Oh-hyun told Korea Economic Daily.