In a significant development within the South Korean shipping industry, Hahn & Co. has selected HMM as the preferred bidder for the sale of management rights of SK Shipping. This decision was reported by the investment banking industry on Feb. 20. Morgan Stanley acts as the sale manager. HMM is set to conduct due diligence until mid-next month, a crucial step before finalizing the acquisition.

Hahn & Co., a private equity firm, acquired SK Shipping in 2018 for 1.5 trillion won and currently holds a 71.43% stake through Hahn & Co. Tanker Holdings Limited. SK Corp., another major shareholder, holds a 16.35% stake. The sale of SK Shipping, a key player in the transportation of crude oil, liquefied petroleum gas (LPG), and liquefied natural gas (LNG), is expected to reshape the landscape of the South Korean shipping industry.

The success of this sale hinges on the valuation of SK Shipping’s main business areas. Hahn & Co. is aiming for a valuation of around 4 trillion won, encompassing SK Shipping’s tanker, LPG, and LNG operations. However, HMM considers a valuation in the 2 trillion won range to be more appropriate. This discrepancy in valuation expectations is a central issue in the negotiations.

SK Shipping’s financial performance in 2023, with sales of 1.8865 trillion won and an operating profit of 367.1 billion won, provides a backdrop to the valuation debate. Meanwhile, HMM’s robust financial health underscores its capacity for mergers and acquisitions, as demonstrated by its 2024 sales of 11.7002 trillion won and an operating profit of 3.5128 trillion won.

A potential complication in the deal is HMM’s previous sale of its LNG division to IMM Private Equity, which included a non-compete clause. This clause could hinder HMM’s ability to acquire SK Shipping’s LNG division, potentially affecting the overall structure of the deal. If HMM only acquires the tankers and LPG, Hahn & Co. may face challenges in separately selling the LNG division later.

Both parties plan to enter into final negotiations on the acquisition method and price after the due diligence period concludes, with the aim of signing a stock purchase agreement (SPA).

Source:Business Korea