This article was displayed on the ChosunBiz MoneyMove (MM) site at 3:31 p.m. on Jun. 1, 2026.
Poongsan is reexamining the sale of its defense institutional sector. Although sale talks with Hanwha Group fell through in Apr., it is known to be searching behind the scenes for acquisition candidates amid considerable expectations that it will ultimately sell the defense institutional sector due to borrowing fund pressure and succession issues.
The key is the sale price. The industry had said the two sides negotiated around 1.5 trillion won, but it is understood the deal failed because Poongsan actually expected 2 trillion to 3 trillion won, creating a wide valuation gap.
According to the investment banking (IB) industry on the 1st, Poongsan is said to be reconsidering a plan to sell off the defense institutional sector separately. Poongsan held talks in Apr. to sell the ammunition business unit to Hanwha Aerospace, but the transaction collapsed after the sides failed to narrow differences over terms including price.
At the time, Poongsan considered spinning off the defense institutional sector and then selling 38% equity in the newly established defense company, to be held by Poongsan Holdings, to Hanwha. It is said there is a high likelihood the sale will again be pursued in this manner.
Behind Poongsan's difficulty in fully shelving the defense sale card is financial pressure. That is why observers say that if not now, it will at some point formally launch a sale. As of the end of the first quarter this year on a consolidation basis, short-term borrowings were 589.4 billion won and current portion of long-term debt was 115.7 billion won. Debt maturing within a year alone is about 705.1 billion won.
Adding 279.4 billion won in bonds and 146.9 billion won in long-term borrowings, debt-like financial liabilities top 1.13 trillion won. By contrast, cash and cash equivalents on a consolidation basis came to 303.2 billion won.
Previously, the market mentioned around 1.5 trillion won as the sale price for Poongsan's defense institutional sector. That was not the value of the entire new defense company, but the price for 38% equity in the new company to be held by Poongsan Holdings plus a 20%–30% management control premium.
However, in the IB and defense industries, there is talk that Poongsan expected a much higher price than 1.5 trillion won. According to a person familiar with the internal situation, Poongsan was said to have had 2 trillion to 3 trillion won in mind for selling management control over 38% equity of the new defense company. Back-calculating from this suggests Poongsan internally valued the defense company's total enterprise value (EV) at about 4 trillion to 6 trillion won.
An industry official said, "There were originally talks in the market that there were other bidders besides Hanwha, and because of that, Hanwha was also willing to recognize a higher price," and added, "But once it became clear that Hanwha was the only real bidder, I understand the pricing leverage shifted to Hanwha."
The question is whether Poongsan can secure a price north of 2 trillion won even if it resumes the sale of the defense institutional sector. Securities houses' projections for this year's EBITDA of Poongsan's defense institutional sector are about 220 billion to 260 billion won.
Given that, a sale price around 2 trillion won can be considered reasonable. Applying a fair EV/EBITDA multiple of 16–18 times to the defense institutional sector and doing a simple calculation, the total EV of Poongsan's defense institutional sector rises to as much as 4.7 trillion won. Even a simple equity value calculation for the 38% equity to be held by Poongsan Holdings comes to as much as about 1.8 trillion won. Adding a management control premium, a price around 2 trillion won does not seem excessive.
By contrast, 3 trillion won is a burdensome price. If the sale price for 38% equity of the defense institutional sector is 3 trillion won, it would require applying up to 30 times this year's expected EBITDA. That is why the industry views 3 trillion won not as the price Poongsan tried to enforce in an actual transaction, but closer to a negotiation ceiling suggested to boost its valuation.