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| A container owned by HMM / Courtesy of HMM |
By Anna J. Park
Korea Development Bank (KDB) has officially kicked off procedures to sell the management right of HMM, a global shipping and logistics company. As KDB Chairman Kang Seog-hoon pledged to expedite the sale of the shipping firm, HMM's privatization process is expected to be carried out in a speedy manner.
According to the state-run bank, Friday, it initiated the process for appointing advisory companies for the sales deal jointly with the Korea Ocean Business Corporation (KOBC) earlier this week. The two firms plan to receive M&A advisory firms' proposals until March 20, and by the end of the month they will select one sales manager, one accounting firm and one law firm, necessary for conducting the sales deal.
KDB and the KOBC are HMM's largest and second-largest shareholders, holding 20.69 percent and 19.96 percent stakes, respectively. The Korea Credit Guarantee Fund, another state-run institution, also holds a 5.02 percent stake in the container transportation company. The state-run companies acquired the management rights of the shipping company during its liquidity crisis in 2016.
"HMM is now estimated to have been completely normalized by strengthening financial and business structures, under the joint management of KDB and the KOBC," a KOBC official said.
Given that the market capitalization of HMM is about 11 trillion won ($8.4 billion), the price of the combined 40.65 percent stake put up for sale is expected to exceed 4 trillion won.
However, one remaining question is what the two largest shareholders of HMM would do with their 2.7 trillion won worth of convertible bonds and bonds with warrants issued by HMM. The shipping company issued the hybrid bonds in 2018 and 2020.
As such mezzanine debt can be converted to stocks, the two state-run companies' combined stake in HMM could spike up to 75 percent of all shares, if the two decide to convert their hybrid bonds into stocks. In this case, the selling price will also rise to over 8 trillion won, placing a huge price burden on potential buyers.
HMM posted a record-high net profit of 10.07 trillion won in 2022, which is an 89 percent jump year-on-year, thanks to high shipping prices. The firm's operating profit also logged an all-time high of 9.94 trillion won last year.
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