Hanwha Aerospace (Hanwha Aero) decided to raise 3.6 trillion won through a capital increase, following a purchase of 7.3% equity in Hanwha Ocean for 1.3 trillion won. The industry interprets this as an effort by Hanwha Group Chairman Kim Seung-yeon to facilitate succession for his three children. Hanwha Energy and Hanwha Impact, which sold their equity in Hanwha Ocean to Hanwha Aerospace, are essentially companies owned by the three siblings: Kim Dong-kwan, Kim Dong-won, and Kim Dong-seon. Hanwha Aerospace has nearly exhausted its cash and cash equivalents to acquire the equity held by these three brothers, and it now appears to be seeking new investment funds from shareholders.
Han Sang-yun, executive director in charge of investor relations at Hanwha Aerospace, noted during the regular shareholders' meeting held on the 25th that the decision to conduct a 3.6 trillion won rights offering just a week after purchasing equity in Hanwha Ocean for 1.3 trillion won was "a decision made for growth." Hanwha Aerospace initially stated in February that it would not require additional capital after announcing its plan to acquire equity in Hanwha Ocean, but it faced criticism for changing its stance by moving forward with the large-scale capital increase.
Hanwha Energy and Hanwha Impact, which secured 1.3 trillion won by transferring equity in Hanwha Ocean to Hanwha Aerospace, are considered key companies in the succession of the three brothers. The three siblings exert influence over the group through a structure of "Hanwha Energy → Hanwha Corporation → Hanwha affiliates." Hanwha Energy is owned by Kim Dong-kwan, Vice Chairman of Hanwha Group (50%), Kim Dong-won, President of Hanwha Life (25%), and Kim Dong-seon, Vice President of Hanwha Galleria (25%). Hanwha Energy also holds 52% of Hanwha Impact's equity.
Currently, Hanwha Energy is preparing for an initial public offering (IPO). Experts believe that it transferred equity in Hanwha Ocean to Hanwha Aerospace to enhance its corporate value. Lee Sang-heon, a research analyst at iM Securities, said, "If Hanwha Energy, having secured a substantial amount of funds, announces that it will use this for acquiring promising companies or capital expenditures (capex), its market valuation could soar."
Industry observers expect that the three siblings will merge with Hanwha Energy in order to increase their equity stake in Hanwha Corporation. The corporate value of Hanwha Energy is high, and the value of Hanwha Corporation must be low in order to elevate the equity stake in Hanwha Corporation. The three siblings may use funds secured from the Hanwha Energy IPO to increase their stake in Hanwha Corporation.
It is anticipated that the final succession process will be organized through a splitting of Hanwha Corporation. In a split, shareholders of the divided company receive shares of the newly established company in proportion. It appears likely that Kim Dong-kwan, Vice Chairman of Hanwha Group, will oversee the defense, shipbuilding, and energy sectors, while Kim Dong-won, President of Hanwha Life, will manage financial affiliates, including insurance and securities companies, and Kim Dong-seon, Vice President of Hanwha Galleria, will take charge of retail, robotics, and semiconductor equipment-related affiliates. They can then raise their equity stake by exchanging shares among themselves.
Hyosung Group has similarly completed its succession process. In June of last year, Hyosung Group split into the existing holding company, Hyosung Corporation, and a new holding company, HS Hyosung. The existing Hyosung Corporation was managed by the eldest son, Chairman Cho Hyun-jun, while the new holding company, HS Hyosung, was overseen by Vice Chairman Cho Hyun-sang. This approach is seen as a way to prevent management disputes between the brothers by separating the affiliates and securing the family's controlling power.
Hanwha Group stated that there are no plans to merge Hanwha Energy with Hanwha Corporation since the succession process for the three brothers is already underway. A company official said, "The sale of equity in Hanwha Ocean by Hanwha Energy was a good result as an investment company, and we have decided to proceed with an IPO to secure new growth engines. There are no plans for a merger between Hanwha Energy and Hanwha Corporation."