SM Group is looking for a partner in its plan to buy Hanjin Shipping Co.'s 54-percent stake in a port terminal on the US West Coast, an acquisition estimated at more than 400 billion won ($342.5 million), according to industry sources Wednesday.
SM Group, which owns South Korea's No. 2 bulk carrier Korea Line Corp., has been seeking to buy a partial stake in the port terminal in Long Beach, California, after acquiring the troubled shipper's US-Asia route and other assets for 37 billion won last week.
While the acquisition of the leading gateway between US and Asia could enhance Korea Line's shipping capacity, SM Group was seeking to buy part of its assets, estimated at least 400 billion won, including 100 billion won of operating funds, due to a lack of funds, according to sources with knowledge of the matter.
Hyundai Merchant Marine (HMM), another major shipping company, is considered as a potential bidder for the half of the stake in Long Beach terminal, but the cash-strapped shipper would also need financial support from its lender, the state-run Korea Development Bank, to buy Hanjin's stake.
SM Group says the joint acquisition of the terminal's stake will be a "win-win" solution for both companies as Korea Line can effectively operate the lucrative line, and HMM would use it as leverage to join the world's largest shipping alliance, 2M.
"If we don't have our own terminal, it would cause trouble in shipping operations in the face of competition with rival companies," an official at SM Group said, asking not to be named.
"We need stakes in the terminal to provide shippers with quality service."
Korea Line, which filed for bankruptcy protection five years ago, was bought by SM Group in 2013 and now operates 29 vessels hauling goods such as iron, ore, crude oil and cars.
Hanjin Shipping, the nation's No. 1 shipper currently under court receivership, has been seeking to sell its assets in an effort to survive an industry-wide slump and cash shortage. Hanjin Shipping and local shippers have been under financial strain due to falling freight rates stemming from an oversupply of ships and a protracted slump in the global economy. (Yonhap)
