Harim walks out of $5bn deal to buy HMM
Talks fail on rights to manage HMM, three-year lock-up demand for consortium partner JKL Partners
Leading poultry processor Harim said that talks to take over South Korea's biggest container shipper HMM had fallen through in a deal that sources said was worth nearly $5 billion.
Harim, chosen as the preferred bidder, has been negotiating a final deal with HMM creditors to take control of the carrier for several weeks but they failed to narrow gaps over rights to manage the company, Reuters reported quoting an official statement.
State-owned agencies Korea Development Bank (KDB) and Korea Ocean Business Corporation (KOBC) had announced in December 2023 that Harim, in partnership with private equity firm JKL Partners, is their preferred bidder to buy the authorities’ combined stake in HMM.
A quick calculation suggests that the total market value of HMM’s total equity to be $8.5 billion (KRW 11.1 trillion), Drewry had mentioned in its update on the possible takeover talks. "This translates into an implied P/B multiple of 0.48x. The average P/B multiple for a sample of peer companies comes out to be 0.75x; thus, executing the transaction at 0.48x, Harim also ends up with a quality deal."
Harim also failed to narrow differences with KDB and KOB over the three-year lock-up demand by the two state-run institutes for its consortium partner JKL Partners, The Korea Economic Daily reported.
"KDB and KOB argued they should continue to monitor HMM as its top creditors, considering HMM’s influence in the country’s shipping industry. Particularly, KOB and the Ministry of Oceans and Fisheries were said to have not withheld the request to the end." KDB and KOB may now convert their $1.3 billion HMM bonds to equity, the report added.
With the planned sale of HMM back to square one, KDB and KOB will remain the largest shareholder and creditors of Harim with 57.9 percent stake.
Maersk and Hapag-Lloyd announced the establishment of an operational collaboration, Gemini Cooperation, in February 2025 with Hapag exiting THE Alliance that includes HMM, Ocean Network Express (ONE) and Yang Ming.