German mainline operator Hapag-Lloyd is said to have failed to make the cut in preliminary bidding for the majority stake in South Korean carrier HMM.
Reports from South Korea said that only the three local bidders, Harim Group-JKL Partners consortium and the logistics groups LX Group and Dongwon, have been shortlisted after preliminary bids closed on 21 August.
Container News contacted Hapag-Lloyd, which had engaged Goldman Sachs as an advisor, but the German line declined to comment.
Although Hapag-Lloyd is the financially strongest among the contenders, being a foreign entity was a disadvantage, and many in South Korea were reportedly hostile to the idea of HMM falling into foreign control.
Investment banking sources said that besides financial standing, the bidders were evaluated on their ability to contribute to, and strengthen South Korea’s shipping industry. Hapag-Lloyd, being an overseas company, fell short in this aspect.
Policy lender Korea Development Bank (KDB) and state-controlled ship finance institution Korea Ocean Business Corporation are selling their stakes, which come up to almost 40%. KDB plans to exchange some of its HMM convertible bonds for additional shares that would take the total stake to 57.87%.
The stake is valued between US$3.8 billion and US$7.6 billion.
It remains to be seen if any of the three bidders can raise the capital needed to take control of HMM. As of 31 March, their cash holdings were US$1.9 billion for LX Group, US$1.7 billion for Harim Group and US$4.59 million for Dongwon.