Hyundai Merchant Drops on Report of Possible Hanjin Merger

  • Government denies considering merging the shipping companies
  • Hyundai Merchant shares fall the most in more than two years

Hyundai Merchant Marine Co. fell the most in more than two years in Seoul trading after a report of a possible merger with Hanjin Shipping Co. sparked concern the move will increase uncertainty about their future.

Shares of Hyundai Merchant, South Korea’s second-largest shipping company, dropped 14 percent, the largest decline since June 12, 2013, to close at 5,130 won. Hanjin Shipping Co., the country’s biggest shipping company, fell 4.8 percent to 4,700 won.

South Korea’s government will discuss a possible merger of Hanjin Shipping and Hyundai Merchant at a vice ministerial meeting on corporate restructuring, the JoongAng Ilbo newspaper reported, citing the government. The nation’s Financial Services Commission denied the report and said the government hasn’t sought a merger. Shipping lines worldwide have been selling assets, cutting workers and are considering consolidations to stem losses as years of slowing global trade and overcapacity eat into rates.

“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 Kiwoom Securities Co. in Seoul. “The biggest uncertainty is whether combining the two will really help them improve their businesses.”

Hanjin Shipping reported a 58 percent gain in third-quarter net income to 58.4 billion won ($50 million) after selling assets to raise cash. The unit of Hanjin Group, which owns Korean Air Lines Co., has posted four straight years of losses through 2014.

Hyundai Merchant hasn’t reported results for the quarter ended September. The company, part of the sprawling Hyundai Group whose assets range from shipping to elevators to leisure businesses, has posted an annual loss in three of the past four years.

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