The Final Winner of HMM Acquisition... Dongwon VS Harim

One Week Left to Select Preferred Negotiation Partner for HMM Acquisition
Dongwon Advances as Comprehensive Logistics Company with Dongwon Roex in Land Logistics
Harim Anticipates Synergy in Shipping Industry with Bulk Carrier Pan Ocean

As the selection of the preferred bidder for the acquisition of HMM, the largest shipping company in South Korea (formerly Hyundai Merchant Marine), approaches within a week, both owners of the two groups participating in the bidding, Dongwon and Harim, have expressed strong determination to expand their logistics businesses through the acquisition, raising keen interest in which company will ultimately prevail.

According to industry sources on the 29th, the HMM creditors, including KDB Industrial Bank and Korea Ocean Business Corporation, are expected to select the preferred bidder for the HMM sale as early as this week. Since the Industrial Bank previously announced plans to sign a stock purchase agreement within the year, it is anticipated that the selection of the preferred bidder will be expedited.

The number of shares up for sale in this HMM transaction is 398.79 million shares (57.9% stake) held by the creditors, with the expected sale price estimated to be around 7 trillion KRW, considering the current HMM stock price and the management premium. Both bidders have submitted prices meeting the seller’s expectations, establishing valid competition, and the key factor in selecting the preferred bidder is expected to be the financing capability of the two companies. The current bid prices are reported to be between 6.3 trillion and 6.4 trillion KRW.

This acquisition battle is not only a contest of pride between the two group owners but also a long-held dream. Kim Jae-cheol, Honorary Chairman of Dongwon Group, born in 1935 and approaching his nineties, is a self-made figure who grew the company based on the fisheries industry. Starting with boarding the first Korean deep-sea fishing vessel Jinamho, Kim transitioned from captain to entrepreneur, growing Dongwon Industries into the world’s largest tuna fishing company. As a businessman, Kim’s final dream is to own a shipping company. At the honorary engineering doctorate degree ceremony at Hanyang University last September, he expressed strong determination, saying, “Acquiring HMM is the pinnacle of my dream,” and “Dongwon Group, which has built its business on the sea all its life, can operate HMM better than anyone else.”

Kim Hong-guk, Chairman of Harim Group, also plans to take a step closer to his dream of becoming the “Cargill of Korea” through the acquisition of HMM. Starting from poultry farming, Kim expanded into feed, livestock, food manufacturing, and distribution, and in 2015, he entered the shipping industry by acquiring Pan Ocean, a bulk carrier-focused shipping company. Although there were concerns about the “winner’s curse” due to an investment exceeding 1 trillion KRW at the time of acquisition, Pan Ocean achieved significant performance growth during the COVID-19 period. By acquiring HMM, which focuses on container ships, Kim aims to follow the path of Cargill, the world’s largest grain company and a major player in shipping.

As the HMM acquisition battle officially begins, the HMM headquarters located in Park One Tower, Yeouido. Photo by Jo Yongjun jun21@

The active competition between the two group owners is ultimately based on the judgment that there is significant synergy potential with their existing businesses through the acquisition of HMM. Dongwon’s strategy is to transform into a comprehensive logistics company connecting land, port, and sea through the acquisition of HMM. At the center of this vision is Dongwon Logis, which Dongwon Group acquired in 2017 (formerly Dongbu Express). Dongwon Logis provides various logistics services including freight transportation, port handling, storage, international logistics, and distribution logistics, and has been growing steadily, recording sales of 1.2142 trillion KRW and operating profit of 20.7 billion KRW last year, setting new records annually since the acquisition.

Dongwon Group expects that connecting Dongwon Logis’s port handling and inland transportation with HMM’s shipping business will significantly enhance the competitiveness of both companies. Particularly, Dongwon’s 100% ownership of Dongwon Busan Container Terminal, which operates container port business, is seen as a factor that can maximize this synergy. The port terminal allows free use of land and sea logistics and provides flexibility to respond to situations such as future declines in sea freight rates. Additionally, the smart port ‘DGT Busan,’ which adopts full automation technology, is considered a strength that enables efficiency in the shipping business.

Harim Group is determined to strengthen synergy with its existing subsidiary Pan Ocean through the acquisition of HMM and to leap forward as a national representative shipping company. Harim owns Pan Ocean, the country’s largest bulk carrier operator with 301 vessels as of the first half of this year, as its core affiliate, and it is expected that the acquisition of container ship-focused HMM will complement its weaknesses and generate synergy without business overlap. Specifically, sharing the global shipping networks of both sides will enable practical collaboration and strengthen sales capabilities, and economies of scale are expected to reduce costs such as fuel expenses.

Chairman Kim Hong-guk expressed at Harim Industrial’s new brand launch event this month that acquiring HMM will strengthen the group’s value chain and contribute to enhancing national competitiveness. He said, “Strengthening the value chain contributes to raising national competitiveness,” and added, “(Strengthening the value chain) is good for us and important for national competitiveness.” He also showed confidence by saying, “(The acquisition of HMM) will be done well by those who are capable going forward.”