This article was displayed on the ChosunBiz MoneyMove (MM) site at 3:31 p.m. on Jun. 1, 2026.
Poongsan is reviewing the sale of its defense institutional sector again. Although talks to sell to Hanwha Group fell through in Apr., it is said to be searching behind the scenes for potential buyers amid widespread expectations that it will ultimately sell the defense institutional sector due to borrowing fund burdens and succession issues.
The key is the sale price. The industry previously said the two sides negotiated around 1.5 trillion won, but it is understood the transaction did not close because Poongsan actually expected a price of 2 trillion to 3 trillion won, creating a wide gap in expectations.
According to the investment banking (IB) industry on the 1st, Poongsan is said to be reexamining a plan to sell the defense institutional sector separately. Poongsan held talks in Apr. to sell its ammunition business unit to Hanwha Aerospace, but the transaction fell apart after the sides failed to bridge differences over terms including price.
At the time, Poongsan considered spinning off the defense institutional sector and then selling 38% equity of the new defense company, which would be held by Poongsan Holdings, to Hanwha. It is also said to be highly likely to pursue a sale in the same manner this time.
Behind Poongsan's difficulty in fully shelving the defense sale card is financial pressure. That is why there is talk it will eventually move in earnest to sell, if not right away. As of the end of the first quarter this year on a consolidation basis, short-term repayment of short-term borrowings stood at 589.4 billion won and current portion of long-term debt at 115.7 billion won. Borrowing fund maturing within a year alone totals about 705.1 billion won.
Adding 279.4 billion won in bonds and 146.9 billion won in long-term borrowings on top of that, borrowing fund–type financial liabilities exceed 1.13 trillion won. By contrast, cash and cash equivalents on a consolidation basis came to 303.2 billion won.
The market had previously 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 a price that added a 20%–30% control premium to the 38% equity in the new company to be held by Poongsan Holdings.
However, talk in the IB and defense industries says Poongsan expected a much higher price than 1.5 trillion won. According to a person familiar with internal circumstances, Poongsan is said to have had in mind 2 trillion to 3 trillion won for the sale of control over the 38% equity in the new defense company. Back-calculating from that, Poongsan is estimated to have internally valued the entire enterprise value (EV) of the defense company at about 4 trillion to 6 trillion won.
An industry official said, "There had been talk in the market that there were other bidders besides Hanwha, and because of this, Hanwha was also willing to recognize a higher price," and added, "But once it became clear that Hanwha was the only genuine bidder, I understand the lead in price negotiations shifted to Hanwha."
The question is whether Poongsan can get a price north of 2 trillion won even if it resumes the sale of the defense institutional sector. Securities houses' projections put Poongsan's defense institutional sector EBITDA this year at about 220 billion to 260 billion won.
Given that, a sale price around 2 trillion won can be seen as reasonable. A simple calculation applying an appropriate defense institutional sector EV/EBITDA multiple of 16–18 times puts the total EV of Poongsan's defense institutional sector at up to 4.7 trillion won. Even calculating only the simple equity value of the 38% equity to be held by Poongsan Holdings comes to as much as about 1.8 trillion won. Adding a control premium, a price around 2 trillion won is not 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 as much as 30 times this year's expected EBITDA. Thus, the industry interprets 3 trillion won as closer to an upper negotiating bound proposed to boost the asking price, rather than a level Poongsan sought to enforce in an actual transaction.
While it is true Poongsan is likely to sell the defense institutional sector considering financial burdens and the future succession structure, it is not in a rush. Defense is currently the Poongsan Group's core profit source. The revenue share is around 30%, but the contribution to operating profit approaches 75%. In addition, ammunition demand has surged since the Ukraine-Russia war, and the scarcity has increased of operators in Korea capable of stably producing large-caliber ammunition.