POSCO Group (POSCO Holdings) is reviewing the acquisition of domestic shipping company HMM, while KB Securities evaluated on the 5th that it could lead to financial burdens.
According to the investment banking (IB) industry on the 5th, POSCO Group is forming an advisory group by contracting with Samil PwC and Boston Consulting Group, among others, to assess the business viability of HMM. This is interpreted as examining whether it is feasible to participate in the acquisition.
Kyung-Hyun Choi, a researcher at KB Securities, noted that expectations and concerns coexist in the market regarding POSCO Group's acquisition of HMM. As of the end of June this year, POSCO Holdings had cash assets of 16.5 trillion won, and it is possible to acquire the expected 30% stake held by Korea Development Bank after HMM's share buyback and cancellation procedure, according to Choi's explanation.
However, Choi explained that considering the points of ▲ POSCO Holdings' capital expenditure (CAPEX) plan for this year is 8.8 trillion won ▲ the key sectors of steel and secondary battery industries are passing through a down cycle ▲ the possibility of cash outflows related to the POSCO E&C accident, the acquisition of HMM by POSCO Group could lead to financial burdens.
Choi stated, "Assuming the acquisition of HMM in terms of capital allocation, the amount of shareholder return is likely to decrease significantly, and it is questionable whether investors will perceive the acquisition as an efficient decision."
He also pointed out that the fact that the synergy after the acquisition may not be significant is an issue. Since POSCO Group accounts for more than 10% of domestic shipping volume, it may seek cost reductions through entry into logistics, but most operations utilize bulk carriers for transportation. In contrast, HMM generates more than 80% of its revenue from container ships.
Choi also noted that while there could be demand for bunkering (fuel supply) utilizing the liquefied natural gas (LNG) terminal operated by POSCO INTERNATIONAL, HMM currently has only two LNG-powered ships.
Regulatory hurdles must also be overcome. According to Article 24, Paragraph 7 of the Shipping Act, a corporation that essentially owns or controls a shipper of specific bulk cargo must obtain permission from the Ministry of Oceans and Fisheries to enter the maritime transportation business.
Choi said that if POSCO Group acquires HMM, it should approach it strategically. He stated, "It is necessary to make decisions such as acquiring only certain divisions of HMM that have significant synergies with existing core businesses," and added that "Given that the sale of HMM is continuing to be delayed, POSCO Group needs to exert negotiation power."