SM Line has spent $646m bolstering its stake in fellow Korean liner HMM, sparking further conjecture of a takeover.
HMM, which the Korean government has been keen to sell, is nearly 10 times larger in teu terms than SM Line, a company which was founded around the time of the collapse of another famous name in Korean container transport, Hanjin Shipping. Nevertheless, with SM now holding a 5.52% stake in HMM and becoming the carrier’s third largest shareholder, the rumour mill in Seoul has restarted talk of a takeover, something denied by SM when it was first revealed to have invested in HMM shares in December last year.
SM Group, which has a background in the construction industry, has bought ought shipping lines in recent years, including Korea Line Corp and Samsun Logix, now rebranded as Korea Shipping Corp.
SM Group chairman Woo Oh-hyun is well known in Korean business circles as a master of mergers and acquisitions, but the scale difference between SM and HMM has many questioning whether Woo can manage a buyout of this size. HMM is the world’s eighth largest liner, and is on track to have a fleet in excess of 1m teu soon, while SM Line lies in 22nd place in Alphaliner’s carrier rankings with a fleet totalling around 85,000 slots leading one business reporter in Seoul to question whether this “shrimp” could swallow a “whale”.
HMM has been under the control of state creditors for many years, but Seoul has indicated in recent months it is looking to privatise the line.
How Strange : Spectacular Results yet Zero Consolidation.
This defies logic and I am surprised to see virtually no consolidation – merger or acquisition – in the post COVID financial windfall in Liner Shipping save for the miniscule DAL to Hapag Lloyd.
So, where are the billions being spent ? The news of acquisition – warehouses, forwarding companies, airlines, new ships – are all to far between and don’t add up to the staggering profits of 2021 in Liner Shipping
Surely there are niches to be entered in to; operational excellence to be incorporated; key customer bases to be acquired; assets – be they ships or containers – or even networks to incorporate to expand ones own.
A mathematical model could also show which carriers operate on cross trades at a lower margin with complementary asset pools – and this would make them perfect to absorb – either to downscale the cross trade and run ships on your core routes – or simply shut-down and retarget the focus.
The last wave of consolidation left a big opening for new operators, and they will come in to the niches – not capital and capacity intensive trunk routes.
#shipping #containershipping #mergersandacquisitions #consolidation