The attempt to sell off South Korea’s largest container shipper HMM has been delayed while the two bidders -- Dongwon Group and Harim Group -- continue to battle over the bidding process.

Dongwon last week filed a complaint over the fairness of the bidding process and raised the possibility of taking legal action if the state-run Korea Development Bank and the Korea Ocean Business Corporation, the owners of 39.879 million shares in HMM, accept Harim Group’s proposal, which has requested the sellers to delay turning their perpetual bonds worth 1.68 trillion won ($1.27 billion) into shares for three years.

If the sellers accept Harim’s proposal of postponing the conversion of their perpetual bonds and choose Harim as the preferred bidder, Harim would be able to keep the sellers’ entire 57.9 percent stake in HMM and rake in up to 289.5 billion won in dividends per year. If not, Harim’s acquired shares would shrink to a 38.9 percent stake and the yearly dividends would shrink accordingly to about 194.5 billion won.

Dongwon claimed that Harim’s request violates the bidding standards of submitting a buyout price based on the condition that the perpetual bonds are not converted into shares, asserting that it could have written up a bigger figure. According to reports, the bidding prices were somewhere between 6.4 trillion and 6.2 trillion won with Harim having submitted a higher offer.

The KDB, however, rejected the notion that it is considering Harim’s deferral proposal. The initial goal was to select a preferred bidder by the end of November and execute the sales of shares in December, but the quest to find the right owner of the container shipper has become muddied. Regarding rumors of a bidding fallout, the state-run bank said that it is standing by its original stance to select a preferred bidder soon and complete the sell-off.

The bidding prices submitted by the two parties when the official bidding process began in November were based on HMM’s market capitalization of about 11 trillion won at the time. The bidding prices did not reflect any premium tags of taking over the ownership rights that usually put an extra value on the buyout cost as HMM has been ailing with falling earnings this year.

The container shipper last year logged a revenue of 18.58 trillion won along with a net profit of 10 trillion won, both record highs, on the back of a surge in freight charges during the COVID-19 pandemic. But the tables have turned this year with decreasing freight charges. HMM posted 6.34 trillion won in revenue and 705.7 billion won in net profit from January to September this year, down 57.9 percent and 91.9 percent compared to last year, respectively.

A group of creditors led by the KDB took HMM under state control in 2016. The creditors hoped that bigger groups such as Hyundai Motor Group and Posco Group with more stable financing would be willing to buy the shipping firm, but their expectations were not met.

“If you look at how the bidding process has dragged on, the more fundamental problem can be found in the fact that the bidding companies simply do not have enough financial resources,” said a merger-and-acquisition analyst who wished to remain anonymous.

“Even if one of these smaller bidders takes over HMM, the winner may have to deal with liquidity problems. Also, the global container shipping industry has entered a recession and is forecast to stay there for a while.”

In terms of cash and cash equivalents, which indicate a company’s financial well-being, Dongwon had 1.16 trillion won and Harim had 983.3 billion won at the end of the third quarter this year.

Dongwon, Korea’s biggest fishing and seafood group known for its canned tuna products, is looking to create synergy by adding HMM to its logistics and container terminal operations. Harim, Korea’s leading poultry processor that took over the country’s top dry bulk shipper Pan Ocean in 2015, is hoping to expand its shipping businesses with the HMM acquisition.

“On top of the prolonged bidding, HMM’s labor union is raising its opposition to the sell-off. If the process gets delayed further, it’s only going to get worse,” the analyst added.

The labor union of HMM began carrying out a one-man protest in front of the presidential office in central Seoul on Monday. The union criticized Dongwon and Harim, claiming that their intention for the buyout was to take away HMM’s retention earnings of over 10 trillion won. The union stressed that if the sell-off process is not halted, it would reject ship departures and step away from the ongoing wage bargaining.