"Situation Has Changed"... Dongwon Group Takes Cautious Mode in Reattempting HMM Acquisition

Sale Conditions and Shipping Market Must Be Monitored Before Review

As negotiations for the sale of HMM, the largest shipping company in South Korea, have collapsed, industry attention is focused on whether a new candidate with acquisition intent and financial capability will emerge. Some speculate that Dongwon Group, which previously competed with Harim Group for the status of preferred negotiation partner, may re-enter the race. The Dongwon Group stated that while their interest in entering the shipping business remains valid, they need to comprehensively consider the sale conditions, the progress of the process, and the changed internal and external circumstances.

Dongwon Group Yangjae-dong Headquarters
[Photo by Dongwon Group]

A Dongwon representative said on the 13th, "Our experience in pursuing the acquisition of HMM and our interest in the development of the shipping industry remain unchanged. We believe that connecting the company's capabilities in port stevedoring and cargo transportation with HMM's shipping business can enhance competitiveness." However, they added, "The situation is different from last year when we participated in the acquisition, and there are many variables to consider," expressing a cautious stance.

Last year, Dongwon Group entered the HMM acquisition bid and participated until the final bidding stage but was outbid by Harim Group, which offered a higher price, and thus was not selected as the preferred negotiation partner. Harim Group offered 6.4 trillion won as their acquisition price, while Dongwon Group reportedly proposed an amount 200 billion won less. Subsequently, with the final collapse of shareholder contract negotiations on the 6th between KDB Industrial Bank, Korea Ocean Business Corporation, and the preferred negotiation partners Harim Group and JKL Partners consortium, attention is turning to the moves of companies, including Dongwon Group, that have been mentioned as potential acquirers.

Dongwon Group has shown a strong determination to acquire HMM. Having acquired Dongwon Roex (formerly Dongbu Express) in 2017 and holding 100% of the shares in Dongwon Busan Container Terminal, which operates container port business, they are capable of providing port stevedoring and inland transportation services. They believe that integrating HMM's shipping business would allow them to transform into a comprehensive logistics company connecting land, port, and sea. Earlier, Kim Jae-chul, Honorary Chairman of Dongwon Group, expressed at Hanyang University’s honorary engineering doctorate award ceremony in September last year, "Acquiring HMM is the pinnacle of our dreams," and stated, "Dongwon Group, which has built its company on the sea for a lifetime, believes it can operate HMM better than anyone else."

The key issue is the shipping industry's situation amid the global economic downturn. Analyses suggest that the global shipping market has entered a downward trend, with global shipping freight rates expected to fall below the break-even point (1000). Additionally, shipping companies form alliances to share cargo space, but these global shipping alliances are undergoing significant changes. Germany’s Hapag-Lloyd, the world’s fifth-largest shipping company, plans to leave 'THE Alliance,' which includes HMM, and join a new alliance called 'Gemini Collaboration' with Maersk, the world’s second-largest shipping company from Denmark. Since Hapag-Lloyd has the largest shipping capacity within THE Alliance, its departure could negatively impact HMM’s performance.

A Dongwon representative emphasized, "Since it is impossible to predict the shipping market and company conditions at the time when the HMM sale resumes, we cannot immediately decide whether to participate in the acquisition again," adding, "We will need to comprehensively review the situation once new conditions, including the sale price, are presented."