Cash-strapped Hanjin Shipping Co. officially announced to sell its stake in the Long Beach Terminal in California, the largest asset of the firm. As Hyundai Merchant Marine (HMM), the nation's second-largest shipping company, and global shipping companies, including Geneva-based Mediterranean Shipping Company S.A. (MSC), the world's second-largest shipping line, are expected to enter the takeover battle for the Long Beach Terminal, they will aggressively negotiate its price.

According to Hanjin Shipping and Seoul Central District Court spokesmen on October 21, the court appointed an advisor, an overseas firm specializing in shipping industry talks, to help with the negotiations on the 19th.

HMM to Compete with MSC for Hanjin Shipping’s Long Beach Terminal

As the asset owned by Hanjin Shipping’s subsidiary Total Terminals International LLC (TTI), the Long Beach Terminal handles more than 30 percent of cargo in the Port of Long Beach, one of the largest ports in the US West Coast along with the Port of Los Angeles. The terminal is frequently used by Hanjin Shipping, which owns a 54 percent stake in TTI that operates Long Beach Terminal and its second largest shareholder MSC, which owns the remaining 46 percent as well as global shipping firms, such as Denmark-based Maersk Line, the world's largest container shipping company, and Taiwan’s Evergreen Marine.

The Port of Long Beach is a leading trade gateway to the U.S., the world’s largest market, and a starting point of the coast-to-coast railway. As not only 4,000-TEU vessels but also larger vessels up to 13,000 TEUs are now able to transit the recently widened Panama Canal, which connects the east and west coasts of the U.S., the value of the Long Beach Terminal has improved further. This is because the terminal can be used as a key spot to operate mega-ships from the west and east coasts of the U.S. as well as the east coast of South America.

For this reason, global shipping firms, which operate routes to the U.S., are highly likely to participate in the takeover battle. HMM, which seeks to jump into a nation’s mega shipping firm by acquiring the largest asset of Hanjin Shipping, and MSC, the second largest shareholder of the terminal and has the preemption preference right, are considered the most potential companies to take over the terminal.

When the court sets up the bidding price through a public tender, MSC, which has the preemption preference right, will decide whether or not to acquire the Long Beach Terminal for such a price. Market industry watchers say that the bidding price of the Long Beach Terminal is currently estimated at 100 billion won (US$87.64 million). When the bidding price is high, MSC can give up the preemption preference right. HMM plans to take over the terminal using the fund for new ship buildings worth 1.4 trillion won (US$1.23 billion) to be raised by the government. To this end, the company should offer a reasonable price that can minimize the excessive spending but can make MSC to give up the preemption preference right.

Source: Business Korea