Korea Development Bank has begun an external due diligence process to reassess the value of its HMM equity. The government plans to announce a roadmap in Jan. next year that includes HMM governance restructuring and a headquarters transfer. With a renewed sale of HMM expected to move forward, attention is on KDB's move to evaluate the value of its equity holdings.
According to the investment banking industry on the 5th, Korea Development Bank sent a request for proposal (RFP) to accounting firms for a fair value assessment due diligence of HMM shares. Korea Development Bank is the largest shareholder of HMM and held 35.42% equity as of the end of September. The bank will conduct a limited competitive bid to select a contractor and receive a final report by the end of Feb. next year.
Korea Development Bank will reassess value in this due diligence by reflecting HMM's stock price volatility and the increased equity from the conversion of perpetual bonds. In July 2016, when HMM came under creditor management due to business difficulties, it issued 328 billion won in convertible bonds (CB) to the creditor group, including KDB, to secure operating funds.
Starting last year, HMM exercised a call option to convert all these CBs early into stock, and Korea Development Bank's HMM equity ratio rose from 29.2% to 35.42%. The second-largest shareholder, Korea Ocean Business Corporation (KOBC), also came to hold 35.08% equity in HMM.
With Korea Development Bank moving to assess the value of its HMM equity, the market sees it as preliminary work for a renewed sale. The government is currently preparing a concrete roadmap for HMM governance restructuring and a headquarters transfer to Busan. The HMM governance overhaul is expected to include privatization measures, such as a sale. The roadmap is said to be slated for announcement in mid-Jan. next year. POSCO Holdings is reviewing an acquisition of HMM. Dongwon Group, which took part in the HMM acquisition race in 2023, has also formed a task force (TF) and is preparing to bid again for HMM.
In the industry, one idea being discussed is to first sell the equity held by Korea Development Bank. When HMM was sold under the Yoon Suk-yeol administration, the combined equity ratio of KDB and KOBC was 57.9%, but after the conversion of perpetual bonds, the two institutions' equity ratios rose to 70%. Considering HMM's market capitalization, 70% equity is worth more than 13 trillion won. As a result, there is speculation that KDB will first sell its stake, including management control.