Asia/Pacific News
South Korea Downplays Talk of a Forced Hyundai, Hanjin Merger
The South Korean government is downplaying a recent claim that it is looking to force a merger between Hyundai Merchant Marine Co. and Hanjin Shipping Co., JOC reports.
According to a press statement, the country's Ministry of Oceans and Fisheries recognizes "a need to maintain the existence of the two companies when considering the impact a merger could have on South Korea's import and export-oriented economy and global shipping alliances, as well as Busan port's transshipment competitiveness."
The newspaper Joong-Ang Daily had reported on a "coerced" merger between the two companies.
Hyundai and Hanjin have been struggling to improve their liquidity after posting cumulative losses of 320 billion won ($277 million) and 670 billion won over the past 10 quarters respectively.
The ministry noted that "The creditor banks of the shipping companies are checking if each company's self-help plan is realistic before deciding whether to give further support."
This is the second time in as many months that South Korea's two largest shipping lines became the focus of merger speculation.
Local media reports that in October Hyundai and Hanjin rejected an informal proposal for consolidation by the government, which has expressed the need for restructuring in the shipping, steel, and petrochemical industries.
"The government recommended us to examine the possibility of a merger but we said it's not feasible," a Hanjin Shipping official said.
Some analysts have also questioned whether a merger between the two companies makes sense.
"There is too much uncertainty such as whether a merger between two companies that are making operating losses will be good and how to untangle the complicated shareholder structure," said Cho Byoung Hee, an analyst at Seoul-based Kiwoom Securities Co..
"The biggest uncertainty is whether combining the two will really help them improve their businesses."
Hyundai and Hanjin's financial woes were chronicled as far back as 2013, when Alphaliner noted that the two companies were facing a crisis due to debt load spiralling out of control; however, the shipping analysts said it did not anticipate any mergers or acquisitions among Korean carriers in the near future.
