THE Korea Development Bank (KDB) seems to be facing a dilemma over its plan to privatize HMM by the end of this year, as large companies have remained lukewarm about participating in the preliminary bid, according to industry officials.
After last month's announcement on the beginning of the sale procedure, multiple Korean mid-sized companies reportedly received the information memorandum, having expressed their interest in the acquisition deal.
LX, SM, Dongwon, Harim and Global Sae-A groups are among those companies mentioned. It is still uncertain whether Hyundai Motor and POSCO groups will participate in the bid.
The recipients of the information memorandum do not necessarily hold enough cash and cashable assets to afford the up to KWR6 trillion (US$4.5 billion) worth of HMM shares put up for sale. LX holds KWR2.4 trillion worth of cash and cashable assets, while Harim has KWR1.5 trillion and SM has KWR1 trillion. Dongwon holds KWR600 billion in cash and cashable assets.
Therefore, potential buyers are pushing ahead to join hands with financial firms.
While Harim and Global Sae-A are said to be seeking cooperation with JKL Partners and IMM Private Equity, respectively, Dongwon may collaborate with Korea Investment Holdings, which is managed by the older brother of the Dongwon vice chairman.
LX is expected to win support from LG or GS groups, considering the family relations among the chiefs of the three groups.
However, the potential buyers still need to pay a significant amount of interest, if they borrow money from financial companies.
Industry officials expect the potential buyers to seek a leveraged buyout, which is intended to pay parts of HMM's KWR12.3 trillion worth of cash and cashable assets to the new owner as dividends, so that the owner can pay its debts.
In such a scenario, HMM could suffer a shortage of cash for its investments in future growth engines.
"If the KDB lets the buyer receive an excessive amount of dividend from HMM, the state-run bank will face criticism for neglecting its duties," a shipping industry official said.
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