HMM majority stake buy to benefit Harim: Drewry

State-owned agencies Korea Development Bank (KDB) and Korea Ocean Business Corporation (KOBC) announced that Harim Holdings (Harim), in partnership with private equity firm JKL Partners, is their preferred bidder to buy the authorities’ combined stake in South Korean container shipping company HMM.

"The market consensus suggests that Harim’s bid for the 57.9 percent ownership, which equates to 398.8 million outstanding shares, is valued at KRW 6.4 trillion (about $4.9 billon," says the latest update from Drewry.

A quick calculation suggests that the total market value of the HMM’s total equity to be $8.5 billion (KRW 11.1 trillion), the update added. "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."

P/B multiple of peer companies

Harim is already a player in dry bulk shipping through its subsidiary Pan Ocean (48 percent of Harim’s operating profit in 3Q23 came from its transportation segment), which operates a fleet of 240 vessels (owned: 112 and chartered-in: 128), the update added. "With a focus on vertical integration, Harim stands to gain from a diversified fleet inclusive of bulkers and containers. This move towards integration will enhance asset management for Harim and HMM, benefitting both entities."

Following the announcement, HMM’s stock surged 32 percent between December 17 and December 22, 2023 compared to the Drewry Container Equity Index rally of 13 percent in the same period. (Drewry Container Equity Index is a market capitalisation-weighted index of Maersk, Hapag Lloyd, Orient Overseas (International), Evergreen Marine Corp Taiwan, Wan Hai Lines, Yang Ming Marine Transport, HMM, Regional Container Lines, COSCO Shipping Holdings, SITC International Holdings, Matson, ZIM Integrated Shipping Services and Samudera Shipping Line.)