SM Line has expanded its hold on HMM after buying more shares, leaving the market to wonder if the rival South Korean ocean-going liner operators will eventually merge.
Last Thursday, SM Line purchased another 3.77m of HMM’s shares for KRW100bn ($76.6m), taking the Samra Midas (SM) group’s total stake in HMM to 6.29%.
Other SM companies, such as Korea Shipping Corporation, Korea Line Corporation (KLC) and STX Construction, as well as group chairman Woo Oh-hyun, had also acquired HMM’s shares in a massive stock purchase exercise on 20 June.
Cross-affiliate holdings are common in South Korea and are commonly viewed as a tactic for the owners of local conglomerates, known as chaebols, to maintain their control.
The SM group’s core business is construction, but its interest in shipping began in 2013 with its acquisition of KLC, which was under court protection. In 2016, it pipped HMM to the post in the bid to acquire the remaining portfolio of bankrupt Hanjin Shipping, resulting in SM Line’s establishment.
A spokesperson for SM Line told WPO that its continuing purchase of HMM’s shares, going back to last December, is purely an investment and it has no ambitions of acquiring HMM. The company is not considering relaunching an IPO that was suspended last November.
The SM Group remains HMM’s third-largest shareholder, behind the state-backed Korea Development Bank (KDB) and Korea Ocean Business Corporation, which have respective stakes of 20.69% and 19.96% as of 31 March. Another state-controlled financial institution, Korea Credit Guarantee Fund, is HMM’s fourth-largest shareholder, with a 5.02% stake.
Drewry’s senior manager for container research, Simon Heaney, believes that while the SM group has become a white knight in South Korea’s shipping industry, HMM enjoyed record profits as container freight rates reached historical highs in 2020 and 2021 and does not need rescuing.
Mr Heaney said: “South Korea has a plethora of carriers, but these two [HMM and SM Line] have the widest reach geographically so I can see why the speculation is brewing. Whether it is practical or not probably depends on SM’s resources. As the industry has boomed, so too has HMM’s valuation.”
While KDB chairman Lee Dong-gull had stated that the bank is inclined to dispose of its holdings in HMM, newly appointed Minister of Oceans and Fisheries Cho Seung-hwan claimed last month that it is premature for the state to release its grip on the country’s flagship carrier.
Separately, SM Line announced today that it has enhanced its Pacific Northwest (PNS) Service, which already calls at Busan, Gwangyang, Yantian, Shanghai, Ningbo, Vancouver, Seattle and Portland, with the addition of a call at Canada’s Prince Rupert port.
PNS started in June, with six 6,500 teu ships.
SM Line said: “Calling at Prince Rupert will not only contribute to securing additional US and Canadian inland cargoes, but will also greatly help maintain punctuality due to the low congestion around the port.”
