Korea Development Bank Begins Process to Sell Management Right of HMM

Korea Development Bank (KDB) has initiated the sale of the management right of global shipping and logistics company, HMM. HMM's privatization process is expected to proceed quickly, as KDB Chairman Kang Seog-hoon has pledged to expedite the sale of the shipping firm.

KDB and the Korea Ocean Business Corporation (KOBC), HMM's largest and second-largest shareholders, have jointly launched the process for appointing advisory companies for the sales deal earlier this week. They plan to receive proposals from M&A advisory firms until March 20th and select a sales manager, an accounting firm, and a law firm by the end of the month.

HMM had been facing liquidity issues when state-run institutions, KDB and KOBC, acquired the management rights of the company in 2016. Today, HMM is estimated to have been completely normalized by strengthening its financial and business structures under joint management.

The sale will comprise a combined 40.65 percent stake, with KDB and KOBC holding 20.69 percent and 19.96 percent stakes, respectively. The Korea Credit Guarantee Fund, another state-run institution, holds a 5.02 percent stake in the container transportation company.

Given that HMM's market capitalization is about 11 trillion won ($8.4 billion), the sale of the combined 40.65 percent stake is expected to exceed 4 trillion won.

However, what the two largest shareholders of HMM would do with their 2.7 trillion won worth of convertible bonds and bonds with warrants issued by HMM remains uncertain. The two state-run companies' combined stake in HMM could spike up to 75 percent of all shares if the two decide to convert their hybrid bonds into stocks. This could result in the selling price rising to over 8 trillion won, placing a significant price burden on potential buyers.

In 2022, HMM reported a record-high net profit of 10.07 trillion won, an 89 percent year-on-year increase, thanks to high shipping prices. The company's operating profit also reached an all-time high of 9.94 trillion won last year.

The sale of HMM's management rights has attracted significant attention from potential buyers, with companies reportedly preparing for the bidding process.