Hyundai Marine, Hanjin Shipping to Rank 38th Globally after Merger

A possible merger between South Korea’s container liners, Hyundai Merchant Marine (HMM)and its larger local rival Hanjin Shipping appears to be not so lucrative, as it is expected to create an entity ranking only 38th out of 5,000 global vessel operators, according to data from VesselsValue, a UK-based shipping valuation firm.

“If HMM & Hanjin merged, they would have a combined fleet value of $2.1 billion even though this sounds a lot, the merged Hanjin & HMM company would only rank 38th in the world in terms of the fleet value, ” said Claudia Norrgren, head of public relations at VesselsValue.

The estimate is not impressive, considering the market status of HMM and Hanjin as South Korea‘s two main flag carriers at sea, local industry watchers also noted.

Hanjin Shipping, which is under court receivership, owns 56 vessels worth $1.31 billion as of Oct. 20, according to VesselsValue. HMM operates 33 vessels that are valued at $818.43 million. The combined assets of Hanjin and HMM would amount to 89 vessels worth $2.13 billion.

“The global ranking of the merged entity would be challenged due to the low percentage of company-owned vessels, as opposed to chartered ships, for both Hanjin and HMM that lost many of their vessels during the 1998 Asian financial crisis,” said an analyst from local brokerage Shinyoung Securities, declining to be named.

Other experts opined that HMM would not be too willing to take over Hanjin’s debt, and therefore would settle for acquiring key assets, such as its US-Asia route that is up for sale.

“It seems highly unlikely for HMM to merge with Hanjin when it has to take on all of Hanjin’s debt. A takeover limited to assets seem like a more plausible scenario,” said Lee Dong-hyun, a professor of international trade and logistics at Pyeongtaek University.

Hanjin Shipping is currently saddled with 6 trillion won ($5.3 billion) worth of debt.

Meanwhile, Hanjin’s main creditor Korea Development Bank is also pushing for HMM to acquire just the core assets of Hanjin. “Hyundai Merchant Marine is considering entering a preliminary bidding for Hanjin’s US-Asia route,” said Cho Seongwook, a spokesperson for KDB.