The container shipping market continues to face challenging conditions as a high-profile asset acquisition deal encounters new obstacles. Korea Line Corporation's (KLC) plan to acquire Hanjin Shipping's Asia-America route appears to be facing resistance from within its parent company, raising questions about the deal's future and its potential market impact.
Board Rejection Creates Uncertainty
Reports indicate that SM Group's board of directors has rejected Korea Line's proposal to purchase Hanjin Shipping's Asia-America route and related assets. This development comes after Korea Line successfully bid 37 billion won (approximately $31.4 million) for the route in November 2016, outcompeting rival Hyundai Merchant Marine (HMM).
Challenges in the Acquisition Process
The acquisition path has proven difficult from the start. Korea Line initially attempted to partner with Hyundai Merchant Marine to jointly bid for Hanjin's terminal assets to support the Asia-America route operations, but the collaboration fell through. The company subsequently withdrew from that portion of the deal due to funding constraints.
The board's primary concern centers on Korea Line's limited experience in container shipping, as the company has traditionally focused on bulk cargo transportation. With the shipping industry experiencing a prolonged downturn, directors worry that entering the container market could strain the company's financial resources.
Potential Pathways Forward
Despite the setback, possibilities remain for the deal to proceed. SM Group officials note that corporate bylaws allow subsidiary companies to independently acquire assets, suggesting Korea Line might pursue alternative acquisition methods. However, the specific approach and associated challenges remain unclear at this stage.
Market Implications
Should the acquisition ultimately fail, several market consequences could follow. The ownership of Hanjin's Asia-America route would return to uncertainty, potentially triggering new bidding competition. Hyundai Merchant Marine, as a previously interested party, might reassess acquisition opportunities, which could alter competitive dynamics in the Asia-America shipping lane. Furthermore, the broader container shipping market's consolidation process could face disruptions, increasing overall market volatility.
The final outcome of this acquisition remains uncertain, with multiple factors still in play. Market observers continue to monitor developments closely as the situation evolves.