Harim, KDB in dispute over $5 bn HMM deal conditions

Korea Development Bank and Korea Ocean Business demand that they continue to be involved in HMM's management

Harim, KDB in dispute over bn HMM deal conditions
Jong-Kwan Park and Han-Jong Choi 2
2024-01-23 13:47:49 pjk@hankyung.com
Mergers & Acquisitions

Talks to sell South Korea’s No. 1 ocean carrier HMM Co. to Harim Group, a leading poultry processor, have made little progress amid disputes over the sale's conditions, according to people with knowledge of the situation on Monday, stoking fears of a collapse in the 6.4 trillion won ($5 billion) deal.

Last month, Korea Development Bank (KDB) and Korea Ocean Business Corp. (KOB), the two largest shareholders of HMM, picked a consortium of Harim Co. and Seoul-based JKL Partners as the preferred buyer of their 57.9% stake in the shipping company.

The two sides were supposed to end the first round of negotiations by Jan. 23, but extended the deadline by two weeks to Feb. 6, according to the sources.

Harim's side is disputing KDB's and KOB’s demand that they continue to be involved in HMM’s management after their stake sale.

KDB and KOB hold a combined 1.68 trillion won worth of bonds convertible into HMM shares.

Harim, KDB in dispute over bn HMM deal conditions

The two state-run institutions argue they should continue to monitor HMM as its top creditors, given HMM’s influence in the country’s shipping industry. However, Harim opposes the demand.

Other issues they disagree on include Harim's requests to restrict HMM’s dividend payments for a certain period so that the company can use its retained earnings for business expansion and deprive KDB and KOB of the right to appoint an outside director recommended by the government.

Korea Ocean Business is understood to have turned them down.

“If Korea Ocean Business refuses them to the end, the deal could collapse,” a source with direct knowledge of the matter told Market Insight, the capital market news outlet of The Korea Economic Daily.

“But they are in the process of narrowing their differences. It remains to be seen whether the deal will go through or not.”

Harim, KDB in dispute over bn HMM deal conditions

HARIM’S CONCESSIONS

During their negotiations, Harim has withheld some of its early demands, such as that KDB and KOB must not convert their remaining perpetual bonds of 1.68 trillion won in HMM into equities for three years. This was the most controversial issue between the two sides.

If the state-run bodies carry out the conversion, Harim’s ownership in HMM will decrease to a 38.9% stake from 57.9%.

Harim had also asked for preemptive rights for new shares to be issued based on the convertible bonds, but has since retracted the request.

They are aiming to complete the deal within the year.

Write to Jong-Kwan Park and Han-Jong Choi at pjk@hankyung.com
 

Yeonhee Kim edited this article.
#HMM #Harim #mergersandacquisitions #KDB #KoreaDevelopmentBank #KoreaOceanBusiness #JKLPartners #PanOcean

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