Kim Seung-yeon, chairman of Hanwha Group, gifted half of his 22.65% stake in Hanwha Corporation, amounting to 11.32%, to his three sons, Kim Dong-kwan, Kim Dong-won, and Kim Dong-sun, thereby transferring part of the management rights. The three brothers increased their equity in Hanwha Corporation, the group's holding company, to 42.67%, enabling them to indirectly control all subsidiaries.
However, the influence of the second son, Kim Dong-won, president of Hanwha Life, who leads the key financial affiliate, is deemed lower compared to his brothers. Kim Dong-won personally holds only 0.03% equity in Hanwha Life. Currently, the indirect control that relies on the aid of his brothers remains valid.
As a result, the market suggests that the three brothers may consider a partitioning through a human division as a way to share the company. This involves partitioning the companies and establishing respective holding companies, then exchanging shares held among the brothers to increase their respective stakes in the holding companies they inherit. Ultimately, President Kim Dong-won will have to bear the burden of leading Hanwha Life through indirect control via a newly established holding company.
According to Hanwha Group on the 2nd, Chairman Kim Seung-yeon gifted an 11.32% equity stake in Hanwha Corporation to his three sons. The eldest son, Kim Dong-kwan, received 4.86%, while President Kim Dong-won and Vice President Kim Dong-sun each received 3.23%. With this gift, Vice President Kim Dong-kwan has secured a total of 20.85%, combining his directly held equity of 9.77% in Hanwha Corporation and his effective holding of 11.08% through Hanwha Energy, making him the actual largest shareholder of Hanwha Corporation. President Kim Dong-won and Vice President Kim Dong-sun have each increased to 10.91%.
Once the succession of management rights is finalized, it is likely that President Kim Dong-won will lead Hanwha Life, the pinnacle of the financial affiliate's governance structure. President Kim Dong-won has been receiving management training at Hanwha Life for the past 10 years since 2015. In February 2023, Hanwha Life appointed a Chief Global Officer and promoted then-Vice President Kim Dong-won to president. He is currently focusing on building his reputation by leading the establishment of Carrot General Insurance and acquiring an equity stake in Nobu Bank in Indonesia in collaboration with Repo Group.
The organizational structure of Hanwha Group's financial affiliates has been streamlined as follows: Hanwha Corporation → Hanwha Life → financial affiliates. By controlling Hanwha Life, one can govern all the financial affiliates of the group. Hanwha Corporation is the largest shareholder, holding 43.24% of Hanwha Life, which is the largest shareholder with a 51.36% stake in HANWHA GENERAL INSURANCE. Hanwha Life also fully owns Hanwha Asset Management and Hanwha Savings Bank.
The problem is that President Kim Dong-won holds only 0.03% equity in Hanwha Life. His effective holding in Hanwha Corporation is also less than 11%. Without the aid of his brothers, it is difficult to establish even indirect control over Hanwha Life. There are concerns that with such limited control, it will be challenging for President Kim Dong-won to take the front line in management.
Compared to his brothers, President Kim Dong-won's influence is relatively low. The youngest, Vice President Kim Dong-sun, publicly acquired Hanwha Galleria shares worth 54.4 billion won in August last year, becoming the second-largest shareholder. He has secured a stable controlling stake through both indirect management via Hanwha Corporation and direct management. Although Vice President Kim Dong-kwan has no directly held shares in Hanwha Aerospace, he has secured a 20.85% equity stake in Hanwha Corporation. This is only comparable to the combined equity (10.91%) of the other two brothers.
Ultimately, President Kim Dong-won must undertake partitioning through a human division to inherit and manage financial affiliates like Hanwha Life independently. It is nearly impossible for Vice President Kim Dong-won to directly purchase Hanwha Life shares worth approximately 2.3 trillion won. Simple calculations indicate that acquiring a 10% stake would require 230 billion won.
The partitioning process entails dividing Hanwha Corporation and establishing respective holding companies. The equity stake in the new holding company will be the same as that of the existing company (Hanwha Corporation). As a trade-off for transferring the equity in the new holding company to his brothers, President Kim Dong-won must secure shares in the financial holding company he will manage through a swap (share exchange). This would allow him to exert indirect control over Hanwha Life through the new holding company.
However, it seems unlikely to escape criticism for entering the ranks of management as the CEO of Hanwha Life through indirect control via the new holding company. Chairman Kim Seung-yeon once served as the CEO of Hanwha Life but has since maintained a professional management system by appointing a 'key man' to the role.
It also remains an issue that he must prove his management abilities. Carrot General Insurance, known as President Kim Dong-won's ambitious project, began with a capital of 85 billion won in 2019 but has reported losses annually until last year. The net loss expanded from 38.1 billion won in 2020 to 76 billion won in 2023, leading to criticism that it has become a financial burden. The subsidiary, HANWHA GENERAL INSURANCE, has supported Carrot General Insurance by injecting funds amounting to 300 billion won.